1. What is High-Yield Savings?

High-yield savings accounts in Canada offer significantly higher interest rates (typically 4-5% APY) compared to traditional savings accounts. These accounts compound interest daily, helping your money grow faster while remaining easily accessible.

2. How Does Compound Interest Work?

The calculator uses the daily compound interest formula:

Where:

• \( A \) — Final amount (CAD)
• \( P \) — Principal investment (CAD)
• \( r \) — Annual interest rate (as decimal)
• \( t \) — Time in years
• 365 — Daily compounding factor

Explanation: Interest is calculated daily and added to your balance, so each day you earn interest on both your principal and previously earned interest.

3. Importance of APY in Savings

Details: The Annual Percentage Yield (APY) reflects the real rate of return, accounting for compound interest. Higher APY means faster growth of your savings over time.

4. Using the Calculator

Tips: Enter your initial deposit in CAD, the annual interest rate (e.g., 4.5 for 4.5%), and the number of years you plan to save. The calculator shows both final amount and total interest earned.

5. Frequently Asked Questions (FAQ)

Q1: Are high-yield savings accounts safe in Canada?
A: Yes, they're protected by CDIC insurance up to $100,000 per institution, just like regular savings accounts.

Q2: How often is interest paid?
A: Most Canadian high-yield accounts pay interest monthly, though it compounds daily.

Q3: Are there fees or minimum balances?
A: Many have no fees but may require minimum balances (typically $1,000-$5,000) to earn the highest rates.

Q4: How does this compare to GICs?
A: High-yield savings offer more liquidity than GICs (which lock in your money) but may have slightly lower rates.

Q5: Are the interest rates guaranteed?
A: No, rates can change with the Bank of Canada's policy rate, unlike fixed-rate GICs.