2 Quick Points to Simplify Annual Percentage Yield (APY)
You have a savings account, so you need to know what it is
First, if you do not have a savings account, go make one. Capital One, Ally, and Marcus are examples of savings accounts that have an above-average annual percentage yield (APY) you can benefit from. Being able to have money in a separate account from your main spending account is important, and you also get to benefit from a higher APY. You can learn how to supercharge your savings here.
Moving on to the focus of the article, APY. What is it exactly? APY is the annual real rate of return on the amount of money you have in an account such as a savings account. It is regulated by the FDIC Truth in Savings Act of 1991. APY takes compounding into effect, meaning that you can expect to earn money on an annual basis from the amount of money you have in your account plus any accumulated interest.
Yes, APY and interest are two separate numbers. I know it sounds confusing, but APY makes it easier for us to understand what we will earn in a year since interest is typically compounded and credited monthly. Here are the 2 ways to simplify APY: The common formula for APY shows how it uses interest and APY is variable.
