High Yield Savings Calculator Fidelity Investments

Compound Interest Formula:

\[ A = P \times \left(1 + \frac{r}{n}\right)^{n \times t} \]

Principal Amount (P):

Annual Interest Rate (r):

Time Period (t):

years

Compounding Frequency (n):

Final Amount (A):

Interest Earned:

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1. What is the Compound Interest Formula?

The compound interest formula calculates how much your money grows over time when interest is earned on both the principal and accumulated interest. This is how high-yield savings accounts like Fidelity's money market accounts work.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times \left(1 + \frac{r}{n}\right)^{n \times t} \]

Where:

\( A \) — Final amount
\( P \) — Principal investment amount
\( r \) — Annual interest rate (decimal)
\( n \) — Number of compounding periods per year
\( t \) — Time the money is invested for (years)

Explanation: More frequent compounding (daily vs. monthly) results in slightly higher returns due to interest being calculated on previously earned interest.

3. Importance of Compound Interest

Details: Compound interest is a powerful force in growing savings. Even small differences in interest rates or compounding frequency can make significant differences over time, especially for long-term savings.

4. Using the Calculator

Tips: Enter your initial deposit, the annual interest rate (like Fidelity's 4.50% APY for money market), the time period, and how often interest compounds. The calculator will show your projected 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. APY gives a more accurate picture of earnings.

Q2: How does Fidelity's money market rate compare?
A: As of 2023, Fidelity offers competitive rates around 4.50% APY, but rates change with market conditions.

Q3: Is interest taxed?
A: Yes, interest earned is taxable as ordinary income in the year it's credited to your account.

Q4: What's the benefit of daily vs. monthly compounding?
A: Daily compounding earns slightly more interest because interest is calculated on a slightly larger balance each day.

Q5: Are there withdrawal limits?
A: Money market accounts may have transaction limits (like 6 withdrawals per month under Regulation D).