Did you know?
Did you know that the Annual Percentage Yield (APY) can help you determine how much your savings account will earn over time? If you have a savings account with an APY of 5.00%, let's explore how it works with a starting deposit of $100 and interest given quarterly.
For the first quarter, your account will earn interest on the $100 at a rate of 5.00% divided by 4 (since it's quarterly). Therefore, for the first quarter, your account will earn $1.25 in interest.
Over the course of the first year, your account will receive interest four times (once each quarter). The interest earned for each quarter will be calculated separately based on the account balance at that time. To calculate the total interest earned in the first year, you will need to sum up the interest earned for each quarter.
While the actual calculations may vary based on compounding and other factors, this example serves to illustrate the potential growth of your savings account over time. Remember, savings accounts are a great way to accumulate wealth, and understanding how interest can impact your savings is key to achieving your financial goals.
