What is APY?

Annual percentage yield, or APY, measures the amount you’ll earn over 12 months on an investment that pays compound interest — such as a high-yield savings account. Choosing investments that offer compound interest vs. simple interest can help you get a higher return on your money.

For example, if you have a $10,000 bond that pays 5% simple interest over 30 years, you’ll earn $15,000 in interest over that period. Put that same amount in a bank account with a 5% APY, or 5% interest compounded yearly, and you’re walking away with an additional $33,219.42 —more than double what the bond paid out!

The more frequently your interest is compounded, the higher your APY, and the more you could earn.