APY Savings Account

Annual percentage yield or commonly known as APY is one financial tool used for evaluating how much a deposit earns you. Why would you look at an account’s APY? Because APY is a standardized way of comparing investments. As a consumer, you want your money to be working at its highest for you, and this mean putting it where it will get the best APY.

The APY is the yield your deposit will earn over the term of a year. It refers to your income earned, and one of the most important aspects of choosing a bank in which to deposit your earnings is to make sure it has a best APY. The APY is unique because it takes compounding into account. Compounding is the process of receiving earnings on your earnings. The quoted APY tells you how much you are actually making on your money, while some other ways of quoting a rate do not necessarily take this into account.

The APY is generally higher for accounts with more frequent compounding periods. You should ask your financial company how often they compound. If your money is compounded daily instead of monthly or quarterly, then you will receive a best APY.

There are also various ways in which you can inflate your personal APY. Look at all of your assets as one, rather than as separate investments. Find ways to make sure that all your money is compounding as frequently as possible.

The formula for calculating APY is APY = (1+r/n)n – 1 where r is the interest rate in its decimal form (e.g., a rate of 6.75% would be written as 0.0675) and n is the number of compounding periods per year (e.g., 4 if the rate compounds quarterly). This formula is also known as the effective annual rate (EAR) calculation.