1. What is High Yield Savings?

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

2. How Does the Calculator Work?

The calculator uses the future value formula:

Where:

• \( FV \) — Future Value (USD)
• \( PV \) — Present Value (USD)
• \( r \) — Annual interest rate (decimal)
• \( n \) — Number of years

Explanation: The formula calculates how much your initial deposit will grow over time with compound interest.

3. Importance of Compound Interest

Details: Compound interest means you earn interest on both your initial deposit and the accumulated interest, leading to exponential growth over time.

4. Using the Calculator

Tips: Enter your initial deposit in USD, annual interest rate as a decimal (e.g., 0.05 for 5%), and number of years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: How often is interest compounded in high yield savings?
A: Most compound interest daily and pay monthly, though you should check with your specific bank.

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

Q3: What's a good high yield savings rate?
A: Rates vary, but typically 4-5% APY is considered good as of 2023-2024.

Q4: How does this compare to regular savings?
A: Traditional savings accounts often pay 0.01%-0.1% APY, making high yield accounts 40-500x better.

Q5: Are there limits on withdrawals?
A: Federal Regulation D previously limited withdrawals to 6 per month, though this was suspended in 2020.