1. What is High-Yield Savings?

High-yield savings accounts offer significantly higher interest rates than traditional savings accounts, typically from online banks (e.g., Synchrony at 4.10% APY). They provide a safe way to grow your money with FDIC insurance while maintaining liquidity.

2. How Does the Calculator Work?

The calculator uses the daily compound interest formula:

Where:

• \( A \) — Final amount ($)
• \( P \) — Principal investment ($)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time in years

Explanation: Interest is compounded daily (365 times per year), which maximizes growth compared to monthly or annual compounding.

3. Importance of Compound Interest

Details: Compound interest means you earn interest on both your principal and previously earned interest. Over time, this creates exponential growth, especially with higher rates and longer time horizons.

4. Using the Calculator

Tips: Enter principal amount in dollars, annual interest rate (e.g., 4.10 for 4.10% APY), and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does this compare to regular savings accounts?
A: Traditional banks offer ~0.01-0.10% APY, while high-yield accounts offer 4-5% APY - 400-500x higher returns on the same balance.

Q2: Are high-yield savings accounts safe?
A: Yes, when from FDIC-insured banks (up to $250,000 per depositor, per bank).

Q3: How often is interest paid?
A: Typically monthly, though the calculator shows daily compounding which maximizes accuracy.

Q4: What's the difference between APY and APR?
A: APY includes compounding effects while APR doesn't. Always compare APY when evaluating savings accounts.

Q5: Are there any drawbacks?
A: Some accounts have minimum balance requirements or withdrawal limits (6 per month under Regulation D).