Wizi Bank — Bank Account Basics | wizi-bank.com
Worked compound interest examples with APY, years and totals, so the effect of compounding is visible in real numbers.
Interest on savings is quoted as an annual percentage yield (APY), which already includes the effect of compounding. That means the APY you see is the effective annual gain on your balance, and two offers can be compared without any further adjustment.
The worked example on this site uses a round starting figure: 1,000 USD at 5% APY grows to about 1,276 USD in 5 years with annual compounding, because 1.05 raised to the power of 5 equals roughly 1.276.
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Year by year the balance reads: 1,050 USD after year one, about 1,103 USD after year two, about 1,158 USD after year three, about 1,216 USD after year four, and about 1,276 USD after year five. The gain in each year is larger than the year before, because interest is earned on previously earned interest.
Because a high-yield savings account typically earns about 10 times more interest than a standard savings account, the same starting balance at a tenfold rate separates sharply over five years. Compounding rewards the length of time the money stays in the account, which is why some savings accounts limit convenient withdrawals per month.
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