What is Anticipated Interest
Anticipated interest is the amount of interest that a savings vehicle will accrue by some future date, assuming there are no deposits or withdrawals during the intervening period. So this is the minimum expected amount of interest that would be realized if the initial deposit was just left to sit undisturbed, with no activity on the account. If any changes are made to the initial principle, that in turn has an impact on the amount of anticipated interest. Likewise, any unforeseen events that affect the interest rate in an expected manner also change the anticipated interest.
BREAKING DOWN Anticipated Interest
Anticipated interest factors in compound interest. For example, a one-year, $1,000 certificate of deposit with a 2 percent annual interest rate would have anticipated interest of $20.15. When used in the context of a savings account, anticipated interest is used to represent the amount of additional money in the form of interest that the account holder is expected to receive.
However, this term can also be used in a scenario that is essentially the opposite, meaning the expected amount an account holder is likely to pay when the account relates to a debt or other obligation. In this context, anticipated interest can also describe the total amount of interest that is expected to be paid on a loan with a specified payoff date, such as a mortgage or car loan. If the loan is repaid early, the actual interest will be less than the anticipated interest.
Anticipated Interest Varies by Account Type
Anticipated interest will of course vary depending on the interest rate offered by the specific type of account and financial institution involved.
An investor putting a lump sum into a high-yield savings account, such as those typically offered by online banks, would have a greater amount of anticipated interest than someone putting the same sum into a traditional savings account, which typically pays a rock-bottom interest rate. This is one reason why it would often be worthwhile to compare the different interest rates and other terms available from a variety of lenders before opening a savings account, particularly if there is a significant amount of money involved.
Regardless of the savings vehicle, it is important to understand how the bank calculates compound interest to know how much interest you can anticipate. Meaning, the account holder must find out if the financial institution calculates the compound interest on a daily, monthly or semi-annually basis, as this will impact the total interest accrued.