1. What is High Yield Savings Account?

A High Yield Savings Account (HYSA) is a type of savings account that offers significantly higher interest rates than traditional savings accounts. These accounts are typically offered by online banks and can help your money grow faster through compound interest.

2. How Does the Calculator Work?

The calculator uses the daily compound interest formula:

Where:

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

Explanation: The formula calculates how your money grows with daily compounding, which means interest is calculated on your principal plus previously earned interest every day.

3. Importance of Compound Interest

Details: Compound interest is the process where interest is earned on both the initial principal and the accumulated interest from previous periods. Over time, this can significantly increase your savings compared to simple interest.

4. Using the Calculator

Tips: Enter your initial deposit (principal), the annual interest rate (e.g., 4.60% for SoFi), and the number of years you plan to save. The calculator will show your final balance and total interest earned.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APY and APR?
A: APY (Annual Percentage Yield) includes compound interest, while APR (Annual Percentage Rate) doesn't. Savings accounts typically use APY.

Q2: How often is interest compounded in HYSA?
A: Most high-yield savings accounts compound interest daily and credit it monthly.

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

Q4: Can interest rates change?
A: Yes, HYSA rates are variable and can change with market conditions.

Q5: Is there a minimum balance requirement?
A: This varies by bank - some have no minimum, others may require $100-$1,000 to earn the highest rate.