March 13, 2026
Written by Catherine Hiles
Certified Financial Education Instructor®
Certified Financial Education Instructor®
Catherine Hiles, CFEI®, originally hails from the U.K. and currently resides in Ohio, where she writes about finance, parenting, pets, home improvement, and more. In her spare time, Catherine enjoys running, reading, and hanging out with her husband, two young children, and energetic dog.
Return on investment (ROI) measures how much money you gain or lose compared to what you originally spent.
You can calculate ROI by dividing your net profit by your initial cost, then multiplying by 100 to get a percentage.
Comparing the ROI of a savings account versus an investing account can help you decide where your money will grow the most.
You don't need to be a financial expert to use ROI. Below, learn how to calculate it and see how it can help you decide between keeping money in a savings account versus putting it to work in an investing account.
ROI measures how profitable an investment is by comparing what you earn to what you spend. Expressed as a percentage, ROI shows you how much money you made – or lost – relative to your original cost. A positive percentage means your investment paid off, while a negative one means you lost money.
Here's the simplest way to think about it: ROI answers the question, "Was this worth it?"
You might hear ROI mentioned in conversations about stocks or real estate, but the concept applies to everyday money decisions, too. Wondering whether to keep your money in a savings account or move some of it into investments? ROI can help you figure it out.
The formula is pretty straightforward:
ROI = (Net Profit ÷ Cost of Investment) × 100
Net profit is what you gained minus what you spent. The cost of the investment is your starting amount. Multiply the result by 100, and you get a percentage.
Let's walk through a quick example. Say you put $1,000 into a high-yield savings account and earn $50 in interest over a year. Your net profit is $50. Your cost is $1,000.
ROI = ($50 ÷ $1,000) × 100 = 5%
That 5% tells you exactly how much your money grew. You can use this same formula for almost anything – evaluating whether a gym membership saves you money, measuring if a side gig is worth your time, or comparing two different savings accounts.
ROI isn't just for people with investment portfolios. It's a useful tool for regular money decisions too.
Suppose you deposit $5,000 into a savings account earning 4% APY. APY stands for annual percentage yield, which is the total interest you earn in a year. After 12 months, you'd have roughly $200 in interest, giving you a 4% ROI.
Now compare that to a traditional savings account earning 0.5% APY. The same $5,000 would earn just $25. Seeing the ROI side by side makes the difference clear – and helps you understand why choosing the right account can help your savings grow faster.
Say you invest $5,000 in an S&P 500 index fund. Based on the market's historical average return of roughly 10% per year, you'd gain around $500 in year one. That's a 10% ROI — compared to the 4% you'd earn in a high-yield savings account on the same amount.
The tradeoff: the savings account return is guaranteed, while the investment return can go up or down. The longer your time horizon, the more that higher potential return matters.
ROI can also help you think about debt payoff. If you have a credit card charging 22% APR, every dollar you put toward that balance essentially "earns" you 22% by avoiding future interest charges. APR stands for annual percentage rate, which is the yearly cost of borrowing money.
Once high-interest debt is cleared, redirecting those payments toward a savings or investing account is often the next smartest move.
ROI gives you a way to compare apples to apples. Instead of guessing which financial choice is better, you can calculate and see the numbers for yourself.
Here's what ROI can help you do:
Compare different options: Paying off debt versus building savings? ROI provides a framework for decision-making.
Evaluate purchases: Is that credit card's annual fee worth the rewards you'll actually earn?
Track progress: Measuring ROI over time shows whether your financial moves are working.
Cut through the noise: Numbers help you make decisions based on facts, not feelings.
For anyone managing a tight budget, ROI thinking can be especially powerful. It helps you stretch every dollar by focusing on the choices that deliver the most value.
"Good" depends entirely on what you're comparing. A 5% return on a savings account is excellent right now. A 5% return on a risky stock investment? Not so much.
Here are some general benchmarks:
Investment Type | Typical ROI Range |
|---|---|
High-yield savings account | 4%–5%, depending on the account |
S&P 500 index fund (historical average) | |
Stock market, historical average | |
Paying off credit card debt | Approx. 22.3% in avoided interest |
Real estate, long-term | 10.6% on average |
Context matters too. A guaranteed 4% return with no risk often beats a potential 10% return that could also result in losses. Your personal situation – including your timeline, risk tolerance, and financial goals – shapes what "good" means for you.
Tip: When comparing ROI across options, make sure you're comparing the same time period. A 10% return over five years isn't the same as 10% in one year.
ROI is useful, but it doesn't tell the whole story. Here are a few things it leaves out.
It doesn't factor in time. A 20% ROI over 10 years is very different from 20% in one year. The basic formula doesn't account for how long your money was tied up. For longer-term comparisons, you might look at annualized ROI, which adjusts the return to reflect a yearly rate.
It doesn't measure risk. Two investments might have the same ROI, but one could be far riskier than the other. ROI alone won't show you that difference.
It ignores ongoing costs. If an investment requires maintenance, fees, or additional contributions, the simple ROI calculation might overstate your actual return.
Inflation can erode gains. A 3% ROI sounds positive until you realize inflation was 4% that year. Your purchasing power actually decreased, even though the number looked good on paper.
For more complex decisions, you might want to explore additional metrics or talk to a financial professional. However, for everyday money choices, basic ROI still provides valuable insight.
You don't need a finance degree to apply ROI thinking. Here's a simple approach:
Identify your options. What are you comparing? Two savings accounts? Paying off debt versus investing?
Estimate the costs. Include any fees, time, or money you'll spend.
Project the returns. What do you expect to gain? Be realistic.
Calculate and compare. Use the formula to see which option delivers better value.
Let's say you have $5,000 and you're deciding whether to keep it in a high-yield savings account or invest it.
Savings account at 4% APY: $200 gain after one year, guaranteed
S&P 500 index fund at ~10% average: ~$500 gain after one year, but not guaranteed
If you need the money within a year or two, the savings account is the safer choice. If you won't need it for five or more years, the investing account has historically delivered stronger returns.
Understanding ROI gives you a practical tool for evaluating financial decisions – big and small. Whether you're choosing a savings account, weighing debt payoff strategies, or considering a side hustle, ROI helps you see the real value of your choices.
The goal isn't perfection. It's progress. Every time you pause to calculate whether something is worth it, you're building stronger financial habits.
Ready to put your money to work? Chime offers both high-yield savings and investing options so you can grow your money — whatever your goals are. Get started with Chime today and explore accounts designed to help you save and spend smarter.
A 20% ROI means you earned 20 cents for every dollar you invested. If you put in $1,000 and earned a 20% ROI, your net profit would be $200, bringing your total to $1,200.
Not automatically. The basic ROI formula measures total return regardless of the time horizon. If you want to compare investments over different periods, you can calculate annualized ROI, which adjusts the return to reflect a yearly rate. This makes it easier to compare a six-month investment to a three-year one.
Yes. A negative ROI means you lost money on the investment. If you spent $500 and got back only $400, your ROI would be -20%. Negative ROI signals that the investment costs more than it returns – a useful warning sign when evaluating past decisions.
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