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If you're focused on saving this year, you probably want to know how much interest you can realistically earn. Below, we'll explore how much $10,000 worth of savings can earn in a year and what factors affect your returns.
Before you can estimate how much interest your savings will earn, you need some key pieces of information:
APY: One of the biggest factors that determines how much interest you earn on your savings is the account's interest rate, which represents how much you earn on your deposits, expressed as a percentage. But a more helpful measure of your earnings is APY (short for annual percentage yield). This represents the true earnings on your entire balance over one year, including principal deposits and compound interest.
Compounding frequency: This refers to the number of times per year interest is calculated and credited to your balance. Depending on the account, interest might compound annually, semiannually, quarterly, monthly, or daily. The more often your interest compounds, the faster your balance grows.