High Yields Savings Account 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:

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1. What is Compound Interest?

Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods. It's often called "interest on interest" and can significantly boost savings growth over time compared to simple interest.

2. How the Calculator Works

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 formula accounts for how often interest is compounded, with more frequent compounding leading to higher returns.

3. Importance of Compounding Frequency

Details: The more frequently interest is compounded, the greater the return. Daily compounding yields slightly more than monthly, which yields more than quarterly, and so on.

4. Using the Calculator

Tips: Enter your initial investment, expected annual interest rate, investment period in years, and how often interest is compounded. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and APY?
A: APR (Annual Percentage Rate) doesn't account for compounding, while APY (Annual Percentage Yield) does. This calculator shows APY-equivalent results.

Q2: How much can I earn with a high-yield savings account?
A: Current rates vary (typically 3-5% APY). A $10,000 investment at 4% APY would grow to $14,802 in 10 years with daily compounding.

Q3: Are high-yield savings accounts safe?
A: Yes, when from FDIC-insured banks (up to $250,000 per depositor). They offer better returns than regular savings with similar safety.

Q4: How does this compare to investing in stocks?
A: Savings accounts are lower risk but typically offer lower returns than stocks long-term. They're ideal for emergency funds or short-term goals.

Q5: When does compounding occur?
A: Depends on the account - some compound daily and pay monthly, others compound monthly or quarterly. Daily compounding is most advantageous.