GLOSSARY · BUDGETING, SPENDING & SAVING
Annual percentage yield (APY)
The yearly return on a deposit with compounding included, which banks must quote under federal Truth in Savings rules. Because it already counts interest earned on interest, two accounts can be compared on APY alone, whatever their compounding schedule. On a savings account the APY is variable and can change at any time.
Also called: APY, annual percentage yield, savings yield, effective yield, yield
FORMULA
APY = (1 + interest ÷ principal)^(365 ÷ days in term) − 1
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · SAVINGS FOUNDATIONS & EMERGENCY FUNDS · FOUNDATIONSWhere to Keep Your SavingsCHAPTER · GOAL-BASED SAVINGS & ACCELERATION · STRATEGIESSinking Funds for Predictable ExpensesRELATED TERMS
SOURCES
- Regulation DD (Truth in Savings), 12 CFR Part 1030. Consumer Financial Protection Bureau.
- 12 CFR Part 1030, Truth in Savings (Regulation DD). Consumer Financial Protection Bureau, via eCFR.
- Regulation DD (Truth in Savings), 12 CFR part 1030. Consumer Financial Protection Bureau.