1. What is the HYSA Monthly Formula?

The High-Yield Savings Account (HYSA) formula calculates how your money grows with monthly compounding interest. It shows the power of compound interest in savings accounts that offer higher-than-average interest rates.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

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

Explanation: The formula accounts for monthly compounding by dividing the annual rate by 12 and compounding monthly for the given number of years.

3. Importance of Compound Interest

Details: Compound interest allows your savings to grow exponentially over time, as you earn interest on both your principal and accumulated interest. High-yield savings accounts typically offer rates significantly higher than traditional savings accounts.

4. Using the Calculator

Tips: Enter your initial deposit amount, the annual interest rate (APY), and the number of years you plan to save. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and APY?
A: APR (Annual Percentage Rate) doesn't account for compounding, while APY (Annual Percentage Yield) does. HYSA rates are typically quoted as APY.

Q2: How often do high-yield savings accounts compound?
A: Most compound daily, but this calculator uses monthly compounding for simplicity. Actual results may vary slightly.

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

Q4: What's a good HYSA interest rate?
A: Rates vary, but typically 3-5% APY is considered good (as of 2023-2024).

Q5: Can I withdraw money from a HYSA?
A: Yes, though some accounts may have withdrawal limits or minimum balance requirements.