1. What is the High Yield Account Calculator?

The High Yield Account Calculator estimates the growth of your savings in a high-yield account using compound interest. It helps you project how your money can grow over time with a competitive annual percentage yield (APY), such as the current 4.50% rate offered by many online banks.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( A \) — Final amount
• \( P \) — Principal investment amount
• \( r \) — Annual interest rate (decimal)
• \( n \) — Number of compounding periods per year
• \( t \) — Time the money is invested for (years)

Explanation: The formula accounts for compound growth, where interest is earned on both the initial principal and the accumulated interest from previous periods.

3. Importance of Compound Interest

Details: Compound interest is powerful for long-term savings growth. Even small differences in interest rates or compounding frequency can significantly impact your final balance over time.

4. Using the Calculator

Tips: Enter your initial deposit, current APY (default is 4.50%), investment period, and compounding frequency. More frequent compounding (e.g., daily vs. annually) yields slightly higher returns.

5. Frequently Asked Questions (FAQ)

Q1: What's a typical APY for high-yield accounts?
A: As of 2023, top high-yield savings accounts offer around 4.00%-5.00% APY, significantly higher than traditional savings accounts.

Q2: How often do high-yield accounts compound?
A: Most compound interest daily and credit it monthly, but this can vary by institution.

Q3: Are high-yield accounts safe?
A: Yes, when offered by FDIC-insured banks (up to $250,000 per depositor).

Q4: What's the difference between APR and APY?
A: APR doesn't account for compounding, while APY does. APY gives a more accurate picture of earnings.

Q5: Are there withdrawal limits?
A: Federal Regulation D previously limited withdrawals to 6 per month, though this was suspended in 2020. Some banks may still impose limits.