AER Calculator – Find out how much interest you'll actually earn

You’re putting your money in a savings account.

The bank promises to pay you interest. But there are different ways to describe that interest.

One way is gross interest rate – this is the amount of interest the bank will pay. But it doesn’t account for compounding, which is affected by how often the bank will actually pay that interest (monthly, quarterly, etc.).

So another way – and a much better way to understand what you’re really going to earn – is the AER.

What is AER?

AER goes a step further than the gross interest rate by accounting for the effects of compounding.

Compounding means you earn interest on your original money and on any interest you’ve already earned. So, if your bank pays interest every month, you earn a bit more than if they paid it just once a year at the end of the year – because you’re earning interest on interest.

AER, therefore, provides a more accurate measure of your potential returns. Unlike gross interest rates, which can be misleading, AER offers a clearer picture of your actual potential earnings.

Understanding the difference between AER and gross interest rates is important because it allows you to make ‘apples to apples’ comparisons and find the best savings account for you.