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.

2. How the Calculator Works

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 money is invested for (years)

Explanation: More frequent compounding (higher n) leads to greater returns. Even small differences in interest rates can have large effects over long periods.

3. Importance of High Yield Savings

Details: High yield savings accounts offer significantly better returns than traditional savings accounts, helping your money grow faster while remaining FDIC insured.

4. Using the Calculator

Tips: Enter principal amount in dollars, annual interest rate as percentage (e.g., 3.5 for 3.5%), compounding frequency (typically 12 for monthly), and time period in years.

5. Frequently Asked Questions (FAQ)

Q1: How often do high yield savings accounts compound?
A: Most compound interest daily or monthly, which this calculator can accommodate.

Q2: Are high yield savings accounts safe?
A: Yes, when offered by FDIC-insured banks (up to $250,000 per depositor).

Q3: How does this compare to regular savings accounts?
A: High yield accounts typically offer 10-20x higher interest rates than traditional savings.

Q4: What's the difference between APY and APR?
A: APY includes compounding effects while APR doesn't. This calculator uses APR inputs.

Q5: Can I withdraw money anytime?
A: Yes, high yield savings accounts maintain liquidity unlike CDs or other term deposits.