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Anonymous
Financial expert · Financer
APY Calculator
Use our APY calculator to turn any rate and compounding schedule into your real annual percentage yield, then see what your savings earn in a year.
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%
$39,292Final Balance
Total invested: $29,000 | Interest earned: $10,292
Balance Growth Over Time
End balance by year
Yearly Breakdown
| Year | Start Balance | Contributions | Interest | End Balance |
|---|---|---|---|---|
| Year 1 | $5,000 | $2,400 | $312 | $7,712 |
| Year 2 | $7,712 | $2,400 | $450 | $10,562 |
| Year 3 | $10,562 | $2,400 | $596 | $13,558 |
| Year 4 | $13,558 | $2,400 | $749 | $16,707 |
| Year 5 | $16,707 | $2,400 | $911 | $20,018 |
| Year 6 | $20,018 | $2,400 | $1,080 | $23,498 |
| Year 7 | $23,498 | $2,400 | $1,258 | $27,156 |
| Year 8 | $27,156 | $2,400 | $1,445 | $31,001 |
| Year 9 | $31,001 | $2,400 | $1,642 | $35,043 |
| Year 10 | $35,043 | $2,400 | $1,849 | $39,292 |
Compounding monthly at 5% annual interest rate with $200/month contributions.
What the APY calculator does
Banks love to advertise a rate, but the number that really matters is your annual percentage yield (APY). This APY calculator takes the rate on a savings account or CD, factors in how often the interest compounds, and shows you the true yield you earn over a year. Enter your numbers above and you'll see the real return, not just the headline rate.
Enter your deposit
Type in the amount you plan to put in, like $10,000. This is your starting balance.
Add the interest rate
Enter the annual rate the bank quotes, for example 4.5%. Use the plain rate, not the APY. The calculator works that part out for you.
Pick how often it compounds
Choose daily, monthly, quarterly, or yearly. Most US savings accounts compound daily, so check your account terms if you're not sure.
Set the time frame
Tell it how long you'll leave the money in, in years. You'll get your APY along with the projected balance at the end.
APY vs. the rate on the sign
Here's the part that trips people up. The interest rate is the base rate before compounding. The APY is what you actually pocket once that interest starts earning interest of its own. Two accounts can both advertise 4.5%, but the one that compounds daily beats the one that compounds once a year. That's why you compare accounts by APY, not by the rate alone.
How the math works
The formula behind APY is APY = (1 + r/n)^n - 1. Here r is the yearly interest rate written as a decimal, and n is how many times the interest compounds in a year.
Say you deposit $10,000 at a 4.5% rate that compounds daily. That makes n = 365. Run it through and your APY comes out to about 4.60%. On that $10,000 you'd earn roughly $460 in the first year instead of the $450 a flat 4.5% would give you. That extra $10 is compounding doing its quiet work, and it grows every year your balance does.
What changes your real yield
A few things can pull your actual return above or below the headline rate.
Compounding frequency. More often is better. Daily beats monthly, and monthly beats yearly.
Fees. A monthly maintenance fee comes straight out of your interest. A $5 charge on a small balance can erase a good chunk of what you earned.
Variable rates. Most savings account rates can change whenever the bank decides. Your APY today is not a promise for next year.
Taxes. Interest you earn is usually taxable income, so your take-home yield ends up lower than the number on screen. Check with a tax pro for your own situation.
Tips to earn more
- Shop by APY, not the advertised rate. It's the only number that lets you compare accounts apples to apples.
- Favor accounts that compound daily and credit interest monthly.
- Watch the fine print for minimum balance rules. Drop below the limit and your rate can fall or a fee can kick in.
- Leave your interest in the account. Compounding only works if the earnings stay put.
- Re-check your rate a couple times a year. If a better APY turns up elsewhere, moving your money is usually quick.
APY calculator FAQ
What is APY?
APY stands for annual percentage yield. It's the total interest you earn on a deposit over one year, including the effect of compounding. Because it folds in compounding, APY is always equal to or higher than the plain interest rate.
What's the difference between APY and APR?
APY is what you earn on money you save. APR (annual percentage rate) is what you pay when you borrow, like on a loan or credit card. APY includes compounding, while APR usually doesn't, so they're used for different products.
Does a higher compounding frequency really matter?
It helps, but less than most people expect. Going from yearly to daily compounding on a 4.5% rate only nudges your APY up by about a tenth of a percent. The interest rate itself moves the needle far more than how often it compounds.
Is the APY guaranteed?
Usually not for savings accounts. Most savings and money market rates are variable, so the bank can change them at any time. A certificate of deposit (CD) is different, since it locks your rate for a set term.
How is interest from my savings taxed?
In the US, interest you earn is generally treated as ordinary income, and your bank reports it to the IRS on Form 1099-INT once it reaches $10 or more for the year. What you owe depends on your tax bracket. Check with a tax professional for your own case.
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