1. What is Compound Interest?

Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods. High APY (Annual Percentage Yield) savings accounts, like those offering 4.66% or more, can significantly grow your money over time due to compounding.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

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

Explanation: More frequent compounding (daily vs. annually) results in higher returns due to the exponential nature of the formula.

3. Benefits of High APY Accounts

Details: High-yield savings accounts offer significantly better returns than traditional savings accounts (typically 0.01%-0.05% APY). For example, $10,000 at 4.66% APY compounded daily grows to $12,594 in 5 years.

4. Using the Calculator

Tips: Enter principal amount in dollars, annual interest rate as a percentage (e.g., 4.66), time in years (can use decimals for months), and select compounding frequency. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and APY?
A: APR doesn't account for compounding, while APY does. APY gives the true annual rate of return.

Q2: How often do high-yield accounts compound?
A: Most compound daily and pay interest monthly, but check with your specific bank.

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

Q4: Why does compounding frequency matter?
A: Daily compounding at 4.66% APY yields slightly more than monthly compounding at the same rate.

Q5: How do taxes affect earnings?
A: Interest is taxable as ordinary income. Consider tax-advantaged accounts for long-term savings.