1. What is Monthly Interest?

Monthly interest is the amount earned on a savings account principal each month, calculated based on the annual interest rate. High-yield savings accounts typically offer higher interest rates than regular savings accounts.

2. How Does the Calculator Work?

The calculator uses the monthly interest formula:

Where:

• \( P \) — Principal amount ($)
• \( r \) — Annual interest rate (decimal)

Explanation: The annual interest is divided by 12 to get the monthly amount.

3. Importance of Interest Calculation

Details: Understanding monthly interest helps savers compare accounts, project earnings, and make informed financial decisions about where to keep their money.

4. Using the Calculator

Tips: Enter the principal amount in dollars and annual interest rate as a percentage (e.g., enter 2.5 for 2.5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How often is interest compounded in high-yield accounts?
A: Most compound interest daily and pay monthly, but check with your specific bank for their compounding schedule.

Q2: Is the interest taxable?
A: Yes, interest earned is generally considered taxable income in most jurisdictions.

Q3: What's considered a "high-yield" interest rate?
A: Rates vary, but typically 3-5% APY or higher is considered high-yield compared to traditional savings accounts.

Q4: Are there limits on withdrawals?
A: Some high-yield accounts may have withdrawal limits or require minimum balances to earn the advertised rate.

Q5: How does this differ from compound interest?
A: This shows simple monthly interest. Actual earnings may be higher due to compounding.