High Yield Savings Interest Calculator

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:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Compound Interest?

Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods. It allows savings to grow at an accelerating rate over time, making it a powerful tool for long-term financial growth.

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: The more frequently interest is compounded, the greater the return on investment due to the exponential growth effect.

3. Importance of High-Yield Savings

Details: High-yield savings accounts typically offer interest rates much higher than traditional savings accounts, making them ideal for emergency funds or short-term savings goals where principal protection is important.

4. Using the Calculator

Tips: Enter the initial deposit amount, annual interest rate (APY), number of years you plan to save, and how often interest is compounded. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does compounding frequency affect returns?
A: More frequent compounding (e.g., daily vs. annually) results in higher returns due to interest being calculated on accumulated interest more often.

Q2: What's the difference between APR and APY?
A: APR is the simple interest rate, while APY includes the effect of compounding. APY gives a more accurate picture of actual earnings.

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

Q4: How often do rates change on high-yield accounts?
A: Rates are variable and can change based on Federal Reserve policy and market conditions, though they tend to remain competitive.

Q5: Are there limits on withdrawals?
A: Federal Regulation D previously limited withdrawals to 6 per month, though this was suspended in 2020. Some banks may still impose limits.