Use this APY interest calculator to help you figure out how your savings will grow over time. It shows you how much money you’ll have after investing for a certain period with regular monthly deposits.
What This APY Interest Calculator Does
This calculator helps you figure out how your savings will grow over time. It shows you how much money you’ll have after investing for a certain period with regular monthly deposits.
Calculator inputs Definition
Initial Investment
The starting amount you put into your investment or savings account. This is the foundation of your investment that will grow over time through interest.
APR vs APY
APR (Annual Percentage Rate) is the basic interest rate on your investment. APY (Annual Percentage Yield) accounts for compound interest, showing what you’ll actually earn over a year. When interest compounds, you earn interest on your interest, which increases your returns.
Investment Period
This is how long you plan to keep your money invested, measured in months. The longer you invest, the more time your money has to grow through compound interest.
Compounding Frequency
This setting determines how often interest is calculated and added to your balance. More frequent compounding (like daily) generally results in slightly higher returns than less frequent compounding (like annually).
Monthly Deposits
Extra money you add to your investment each month. Regular contributions, even small ones, can significantly increase your ending balance over time.
Ending Balance
The total amount you’ll have at the end of your investment period. This includes your initial investment, all your monthly deposits, and the interest you’ve earned.
Growth Projection
The chart visually shows how your money grows over time, breaking down the three components: your initial investment (which stays constant), your contributions (which increase steadily), and your interest earnings (which grow faster over time).
Why This Matters
Understanding how compound interest works helps you make better decisions about saving and investing. Even small changes to your initial investment, monthly contribution, or investment period can make a big difference in your final balance.
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What Is An APY Interest
APY (Annual Percentage Yield) is the real money you make on your savings over a year when counting all the compound interest. It’s different from the basic interest rate because it shows what you actually end up with after all the compounding happens.
How APY Works
Think of APY like a snowball rolling downhill. As your money earns interest, that new interest starts earning interest too. Put $1,000 in a savings account with 5% APY, and after a year you’ll have $1,050. The next year, you’re earning interest on that full $1,050, not just your original $1,000.
Why APY Matters
When shopping for savings accounts or investments, APY gives you the honest picture of what you’ll earn. It’s the number that lets you compare apples to apples, even when banks compound interest at different times (some daily, some monthly).
APY vs APR
Here’s the main thing: APY includes compound interest, while APR doesn’t. Because of this, APY will always be higher than APR for the same interest rate. The more often your interest compounds, the bigger this gap becomes.
In this calculator, when you adjust the APR slider, watch how the APY number changes based on your compounding frequency. That APY number tells you what your money is really earning each year.
How Do You Calculate APY?
APY isn’t as complicated to figure out as it might seem. You can calculate it using a simple formula that accounts for how often interest compounds.
The formula for APY is: APY = (1 + r/n)^n – 1
Where:
- r is the annual interest rate (APR) expressed as a decimal (so 5% becomes 0.05)
- n is the number of times the interest compounds per year
For example, if you have an investment with a 5% APR that compounds monthly:
- r = 0.05
- n = 12 (for monthly compounding)
Plugging these into the formula: APY = (1 + 0.05/12)^12 – 1 APY = (1 + 0.00417)^12 – 1 APY = 1.0512 – 1 APY = 0.0512 or 5.12%
This means your actual yearly return is 5.12%, slightly higher than the stated 5% APR.
The calculator on your screen does this math automatically. When you change either the APR or the compounding frequency (daily, weekly, monthly, etc.), it recalculates the APY to show you what you’ll really earn.
More frequent compounding (like daily instead of monthly) will push your APY higher, even with the same APR.