APR (the rate banks advertise) and APY (what you actually earn) are different. Compounding turns your APR into a higher effective yield. Use this calculator to see your real annual return and project your savings growth.
APR (Annual Percentage Rate) is the simple interest rate a bank advertises. APY (Annual Percentage Yield) is what you actually earn once compounding is factored in. The more frequently interest compounds, the higher your APY relative to your APR.
Formula: APY = (1 + APR/n)ⁿ − 1, where n is the number of compounding periods per year.
For FIRE planning, high-yield savings accounts and money market funds use daily or monthly compounding. Even a small difference in APY compounds significantly over years — which is why this number matters more than the advertised APR.
APY is your true annual return once compounding is included — always equal to or higher than the stated APR. Enter your APR and compounding frequency above to see what your savings actually earn, and compare accounts on an apples-to-apples basis.
For long-term growth, see how a rate compounds over decades with the compound interest calculator, or turn your returns into a retirement date with the FIRE calculator.
APY (Annual Percentage Yield) is the real rate of return on a savings or investment account, taking into account the effect of compounding interest. Unlike APR, APY reflects how often interest is compounded — daily, monthly, or quarterly — so it gives a more accurate picture of what you actually earn.
APR (Annual Percentage Rate) is the stated interest rate without factoring in compounding. APY includes the effect of compounding and is always equal to or higher than APR. For example, a 5% APR compounded monthly becomes approximately 5.12% APY. When comparing savings accounts, always compare APY for an accurate comparison.
APY = (1 + APR/n)^n - 1, where n is the number of compounding periods per year. For monthly compounding (n=12) at 5% APR: APY = (1 + 0.05/12)^12 - 1 = approximately 5.116%.