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 what makes savings accounts grow exponentially over time, especially with high-yield accounts like Amex's offering.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( A \) — Future value of investment
• \( P \) — Principal investment amount
• \( r \) — Annual interest rate (decimal)
• \( n \) — Number of times interest is compounded per year
• \( t \) — Time the money is invested for (years)

Explanation: The more frequently interest is compounded, the greater the return on your investment.

3. Importance of Compound Interest

Details: Understanding compound interest helps in financial planning, showing how small regular investments can grow significantly over time, especially in high-yield savings accounts.

4. Using the Calculator

Tips: Enter your initial deposit, current interest rate (like Amex's high-yield savings rate), time horizon, and compounding frequency. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does Amex's high-yield savings compare to regular savings?
A: Amex's high-yield savings typically offers much higher interest rates than traditional savings accounts, leading to faster growth through compounding.

Q2: How often does Amex compound interest?
A: Most high-yield savings accounts, including Amex's, compound interest daily and pay it monthly.

Q3: Is there a minimum balance for Amex high-yield savings?
A: Currently, Amex requires no minimum balance to open or maintain the account.

Q4: How does compounding frequency affect returns?
A: More frequent compounding (daily vs. annually) results in slightly higher returns due to interest earning interest more often.

Q5: Are there tax implications?
A: Yes, interest earned is taxable income. Consider tax-advantaged accounts for long-term savings.