1. What is Monthly Compound Interest?

Monthly compound interest means your savings earn interest each month, and that interest is added to your principal so it also earns interest in subsequent months. This creates exponential growth of your savings over time.

2. How Does the Calculator Work?

The calculator uses the compound interest formula with monthly compounding:

Where:

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

Explanation: The formula accounts for interest being calculated and added to the principal 12 times per year (monthly compounding).

3. Benefits of High-Yield Savings

Details: High-yield savings accounts typically offer significantly higher interest rates than traditional savings accounts, allowing your money to grow faster through compound interest.

4. Using the Calculator

Tips: Enter your initial deposit (principal), the annual interest rate (APY), and the number of years you plan to save. The calculator will show your projected balance and total interest earned.

5. Frequently Asked Questions (FAQ)

Q1: How often is interest compounded in high-yield savings accounts?
A: Most compound interest daily or monthly, which this calculator accounts for with monthly compounding.

Q2: What's the difference between APR and APY?
A: APR is the simple interest rate, while APY includes compounding effects. Use APY for this calculator.

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

Q4: How much can I earn with a high-yield savings account?
A: Earnings depend on the interest rate and your balance. For example, $10,000 at 4% APY grows to $14,802 in 10 years.

Q5: Are there any limitations to this calculator?
A: It assumes a constant interest rate and no additional deposits or withdrawals.