1. What is Monthly Compounding?

Monthly compounding means your interest is calculated and added to your principal each month, allowing you to earn interest on previously earned interest. This accelerates your savings growth compared to simple interest.

2. How the Calculator Works

The calculator uses the compound interest formula:

Where:

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

Example: $10,000 at 4% APY for 5 years grows to $12,209.97 with monthly compounding.

3. Benefits of High-Yield Savings

Details: High-yield savings accounts typically offer 10-25x higher interest than traditional savings accounts, with FDIC insurance up to $250,000 per depositor.

4. Using the Calculator

Tips: Enter your initial deposit, the account's annual percentage yield (APY), and the number of years you plan to save. The calculator shows projected growth with monthly compounding.

5. Frequently Asked Questions (FAQ)

Q1: How often is interest compounded in high-yield accounts?
A: Most compound interest daily or monthly, but pay it out monthly.

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 APR and APY?
A: APR doesn't account for compounding, while APY does. Always compare APY when evaluating accounts.

Q4: How much can I earn with high-yield savings?
A: With current rates around 4-5%, a $10,000 deposit could earn $400-$500 in the first year.

Q5: Are there withdrawal limits?
A: Federal Regulation D limits certain withdrawals to 6 per month, though this was suspended in 2020.