A lot of people end up at my site after searching on the question “How much interest do you earn on one million dollars?”
So, I’ve decided to give them a proper answer: How much interest do you earn on a million dollars? The answer is, of course, it depends.
It depends on several factors including: What is the interest rate? Over what period of time? How often is the interest calculated and paid during the period?
What is the interest rate?
Obviously the higher the interest rate, the better. Even small differences result in large amounts of money over long periods of time. As a practical example, we’ll use a 4% interest rate which is easily available with a high interest online savings account (update: rates have dropped since this was originally published).
Over what period of time?
The longer the better. Compound interest works it’s magic best over long periods of time. I’ll give a couple of examples using different periods of time.
How often is the interest calculated and paid?
The more often, the better. Is the money compounded yearly, quarterly, monthly, or daily? For our example we’ll assume the money is compounded monthly.
So, to answer the question, how much interest do you earn on One Million Dollars (assuming a 4% interest rate, compounded monthly)?
One Day – $109.59
One Month – $3,333.33
One Year – $40,741.54
Five Years – $220,996.59
Ten Years – $490,832.68
Twenty Years – $1,222,582.09
So, it doesn’t take long for the money to really add up. And there are a lot of ways to get a higher interest rate than 4%. You can use a compound interest calculator to experiment with different interest rates, periods of time, and compounding periods.