1. What is Daily Compound Interest?

Daily compound interest means your interest is calculated and added to your principal balance every day. This differs from simple interest where you only earn interest on the original principal. With compounding, you earn "interest on interest," which accelerates your savings growth over time.

2. How the Calculator Works

The calculator uses the daily compound interest formula:

Where:

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

Example: $10,000 at 4.25% APY for 5 years would grow to $12,336.05, earning $2,336.05 in interest.

3. Current High-Yield Savings Rates

Current Rates (2023): Many online banks offer 4.00%-4.50% APY, significantly higher than traditional banks. Examples include:

• American Express: 4.25% APY
• Ally Bank: 4.20% APY
• Marcus by Goldman Sachs: 4.15% APY

4. Using the Calculator

Tips: Enter your principal amount, current APY (as a percentage), and time period in years. The calculator will show your projected balance and total interest earned with daily compounding.

5. Frequently Asked Questions (FAQ)

Q1: How often is interest paid on high-yield savings accounts?
A: Most pay interest monthly, though it compounds daily.

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

Q3: What's the difference between APY and APR?
A: APY includes compounding effects while APR doesn't. Always compare APY for savings accounts.

Q4: Are there limits on withdrawals?
A: Federal Regulation D limits certain withdrawals to 6 per month, though this was suspended during COVID.

Q5: How do I get the highest rates?
A: Online banks typically offer better rates than brick-and-mortar banks due to lower overhead costs.