APY Savings Calculator
Calculate how much your savings will grow with compound interest.
End Balance
$0.00
Total Interest Earned
$0.00
Total Contributions
$0.00
Return on Investment
0%
Understanding APY in Your Savings
Annual Percentage Yield (APY) is a crucial metric for anyone looking to maximize their savings. Unlike simple interest, APY reflects the real rate of return on your money by accounting for the effect of compounding interest throughout the year.
When you put money into a high-yield savings account or a Certificate of Deposit (CD), the bank pays you interest. That interest is then added to your balance, and in the next period, you earn interest on your original deposit plus the interest you already earned. This "interest on interest" is what makes your money grow exponentially over time.
How to Use This Calculator
- Initial Deposit: The amount of money you are starting with today.
- Monthly Contribution: The extra amount you plan to save every month. Even small amounts like $50 can significantly boost your final balance.
- APY: The annual percentage yield offered by your bank. High-yield savings accounts currently offer anywhere from 3.5% to over 5%.
- Time Period: How long you plan to leave the money in the account.
Realistic Example:
If you start with $10,000 in a high-yield account with a 4.5% APY and contribute $500 per month, after 10 years, you would have approximately $89,450. Your total contributions would be $70,000, meaning you earned nearly $19,450 just in interest!
If you start with $10,000 in a high-yield account with a 4.5% APY and contribute $500 per month, after 10 years, you would have approximately $89,450. Your total contributions would be $70,000, meaning you earned nearly $19,450 just in interest!
APY vs. APR: What's the Difference?
It is easy to confuse APY with APR (Annual Percentage Rate). The key difference is compounding. APR represents the annual interest rate without taking into account the compounding of interest within that year. APY, however, includes the frequency of compounding. Therefore, the APY is always slightly higher than the APR if interest is compounded more than once a year.
When you are saving money, you want the highest APY possible. When you are borrowing money (like a loan or credit card), you want the lowest APR.