High-Yield Savings Account (HYSA) Calculator
Estimated Total Balance
How a High-Yield Savings Account Works
A High-Yield Savings Account (HYSA) is a type of savings account that typically pays a significantly higher interest rate than a standard savings account. While traditional banks might offer an APY (Annual Percentage Yield) as low as 0.01%, high-yield accounts often offer rates between 4.00% and 5.00%, depending on the economic environment.
The primary driver of growth in an HYSA is compound interest. This is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods. Over time, this creates a snowball effect where your money earns money, and that new money earns even more.
The Math Behind the Calculation
To calculate the future value of your savings with monthly contributions, we use the formula for the future value of an ordinary annuity combined with compound interest:
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) – 1) / (r/n)]
- A: The future value of the investment.
- P: The initial deposit (principal).
- PMT: The monthly contribution amount.
- r: The annual interest rate (decimal).
- n: The number of times interest compounds per year.
- t: The number of years the money is invested.
Example Calculation
Imagine you start with $10,000 in an HYSA offering 4.50% APY. You decide to contribute $500 every month for 10 years. Here is how your wealth grows:
| Metric | Value |
|---|---|
| Initial Deposit | $10,000.00 |
| Total Contributions (10 Years) | $60,000.00 |
| Total Interest Earned | $19,554.21 |
| Final Account Balance | $89,554.21 |
Why Choose an HYSA Over Traditional Savings?
The difference between a 0.01% rate and a 4.50% rate is massive over long periods. In the example above, if you kept that money in a traditional account at 0.01%, you would earn less than $100 in interest over the decade, compared to nearly $20,000 in a high-yield account. HYSA accounts are typically FDIC insured up to $250,000, making them a low-risk, high-reward tool for emergency funds and short-term financial goals.