Here’s How Much $10,000 Will Make in a High-Yield Savings Account – Technologist

The amount of money you’ll make in interest from a savings account depends on two things: how much money you put into the account and the interest rate that account pays.

Seemingly a simple equation, many Americans fail to recognize how much of an impact this can have on their finances.

$10,000 in Savings: Comparing One-Year Interest at 1% and 5%

document.addEventListener(‘DOMContentLoaded’, function () {

high_yield_savings_calculate();

var loanForm = document.getElementById(‘high_yield_savings_loan-form’);
var inputs = loanForm.querySelectorAll(‘input, select’);
var amortSchedule = document.getElementById(‘high_yield_savings_interestTable’);

inputs.forEach(function (input) {
input.addEventListener(‘keyup’, high_yield_savings_calculate);
input.addEventListener(‘change’, high_yield_savings_calculate);
});

document.getElementById(‘high_yield_savings_amort-link-1’).addEventListener(‘click’, function () {

if (amortSchedule.style.display === ‘none’) {
amortSchedule.style.display = ”;
}
});

});

const initialDepositInput = document.getElementById(“high_yield_savings_initialDeposit”);
const recurringDepositInput = document.getElementById(“high_yield_savings_recurringDeposit”);
const interestRateInput = document.getElementById(“high_yield_savings_apy_input”);
const depositPeriodInput = document.getElementById(“high_yield_savings_depositPeriod”);
const periodTypeSelect = document.getElementById(“high_yield_savings_periodType”);
const totalInterestEarnedOutput = document.getElementById(“high_yield_savings_totalInterestEarned”);
const totalEndingBalanceOutput = document.getElementById(“high_yield_savings_totalEndingBalance”);
const totalAmountSavedOutput = document.getElementById(“high_yield_savings_totalAmountSaved”);
const interestTableDiv = document.getElementById(“high_yield_savings_interestTable”);

function high_yield_savings_calculate(selectedFieldEvent) {
console.log(“high_yield_savings_calculate”);

clark_calc_init_amount_field(selectedFieldEvent);

const initialDeposit = clark_calc_convertToNumber(initialDepositInput.value);
const recurringDeposit = clark_calc_convertToNumber(recurringDepositInput.value);
const apy = parseFloat(interestRateInput.value) / 100;
const depositPeriod = parseFloat(depositPeriodInput.value);
const periodType = periodTypeSelect.value;
console.log(“initialDeposit: ” + initialDeposit);

function calculateAPR(apy) {
const n = 365; // Daily compounding
return (Math.pow(1 + apy, 1 / n) – 1) * n * 100;
}

let apr = calculateAPR(apy);
let periods = 0;

let averageDaysInMonth = 365 / 12;

let currentDate = new Date();
currentDate.setDate(1); // Set to 1st of month
let endDate = new Date();
endDate.setDate(1); // Set to 1st of month

if (periodType === “months”) {

endDate.setMonth(currentDate.getMonth() + depositPeriod);

// calculate the difference in milliseconds
const diffInMs = Math.abs(endDate – currentDate);

// convert the difference to days
periods = Math.floor(diffInMs / (1000 * 60 * 60 * 24)) – 1;

} else if (periodType === “years”) {
periods = depositPeriod * 365; // e.g. 1 year = 365 days
}

let interestRatePerDay = (apr / 100) / 365;

let balance = initialDeposit;
let totalInterestEarned = 0;

//**********************************
let monthCount = 0;
let interestTableHTML = “

“;
for (let i = 1; i <= periods; i++) {

let interestEarned = balance * (interestRatePerDay);

totalInterestEarned += interestEarned;

balance += interestEarned;

let loopModNum = 30;

const lastDayOfMonth = new Date(currentDate.getFullYear(), currentDate.getMonth() + 1, 0).getDate();

if (currentDate.getDate() === lastDayOfMonth || i === periods) {// || (i % 365 === 0)) {
monthCount++;
balance += recurringDeposit; //
interestTableHTML += "

“;

}
currentDate.setDate(currentDate.getDate() + 1);
}

interestTableHTML += “

Time	Cumulative Interest Earned
After Month ” + monthCount + ”	” + clarkCalculators_formatMoney(totalInterestEarned) + “

“;
//**********************************

const totalEndingBalance = clarkCalculators_formatMoney(balance);
totalInterestEarned = clarkCalculators_formatMoney(totalInterestEarned);

let timeInMonths;
if (periodType === “months”) {
timeInMonths = depositPeriod;
} else if (periodType === “years”) {
timeInMonths = depositPeriod * 12;
}

const totalAmountSaved = initialDeposit + (recurringDeposit * (timeInMonths));

var labelExtra = “After ” + depositPeriod.toString().charAt(0).toUpperCase() + depositPeriod.toString().slice(1) + ” ” + periodType.charAt(0).toUpperCase() + periodType.slice(1);
document.getElementById(‘high_yield_savings_totalInterestEarnedLabel’).innerHTML = “Total Interest Earned ” + labelExtra;
totalInterestEarnedOutput.innerHTML = totalInterestEarned;

document.getElementById(‘high_yield_savings_totalEndingBalanceLabel’).innerHTML = “Total Ending Balance Including Interest ” + labelExtra;
totalEndingBalanceOutput.innerHTML = totalEndingBalance;

interestTableDiv.innerHTML = interestTableHTML;

totalAmountSavedOutput.innerHTML = clarkCalculators_formatMoney(totalAmountSaved);

document.getElementById(“high_yield_savings_initDepositDisplay”).innerHTML = clarkCalculators_formatMoney(initialDeposit);
document.getElementById(“high_yield_savings_monthlyDepositDisplay”).innerHTML = clarkCalculators_formatMoney(totalAmountSaved – initialDeposit);

var elements = document.getElementsByClassName(‘deposit-breakdown’);
for (var i = 0; i 0 && recurringDeposit > 0) {
elements[i].style.display = ”;
}
else {
elements[i].style.display = ‘none’;
}
}

document.getElementById(“high_yield_savings_calculated_apr”).innerHTML = “*note: Interest Rate (%) APR is ” + apr.toFixed(2) + “%”;

}

First, let’s give you a simple example. Here’s what would happen if you deposited $10,000 at a bank paying 5% APY vs. $10,000 in a bank paying 1% APY and held the money there for one year.

Here’s a look at the $10,000 at 5% interest for one year, using our high-yield savings account calculator:

Initial Deposit	Interest Rate	Additional Deposits	Time	Total Interest Earned	Total Balance
$10,000	5.0%	$0	1 Year	$498.60	$10,498.60

As you can see, you’re earning nearly $500 a year at that rate.

Here’s the same calculation with 1% interest:

Initial Deposit	Interest Rate	Additional Deposits	Time	Total Interest Earned	Total Balance
$10,000	1.0%	$0	1 Year	$99.72	$10,099.72

That’s essentially $100 in interest earned. Or a difference of about $400 (which makes sense, considering there’s a 4% gap between the two examples).

As the example illustrates, putting cash in a lower-earning account can mean missing out on hundreds of dollars each year.

Americans Consistently Fail To Maximize Our Savings Account Interest Rates

In 2022, the Wall Street Journal wrote an article titled “The $42 Billion Question: Why Aren’t Americans Ditching Big Banks?” It stressed that by keeping money in low-interest savings accounts at Bank of America, Citigroup, JPMorgan Chase, U.S. Bancorp and Wells Fargo, Americans missed out on $42 billion — in just three months (Q3 of ’22).

As a response to the Great Recession, the Federal Reserve held its effective funds rate below 2.5% from April 2008 to September 2022 — more than 14 years. For the majority of that period, rates were effectively zero (less than 0.2%). Banks typically base their savings account interest rates on the Fed rate. So Americans got used to the fact that you weren’t earning any significant interest from savings, no matter the bank.

That changed when the Fed raised rates 4.75% in two-and-a-half years to counter inflation.

Still, what Clark labels behavioral economics and inertia won out for millions of Americans. If they held their savings at a big bank paying low interest before, they often didn’t switch to one of the best high-yield savings account options.

Perhaps if they’d taken the time to run the numbers in our high-yield savings account calculator, they would have made better financial decisions. Now it’s your turn to play with the tool and see how much interest you could be earning if you maximized your interest rate by choosing the right bank.

Final Thoughts

Why turn down free money?

No, you shouldn’t only put your money into a savings account based on the interest rate. Some banks offer higher interest than the institutions we include in our best high-yield savings account post that we update frequently. But for various reasons (customer service, checklists of requirements, fees, account minimums, etc.), we don’t consider them the best.

But if you’re doing business with a large bank out of inertia, or just because you always have, consider the extra money you can make by finding a better savings account. Even if you still leave your checking account at your previous bank.

The post Here’s How Much $10,000 Will Make in a High-Yield Savings Account appeared first on Clark Howard.