Definition
The amount of interest you earn on savings in one year, including compound interest. A higher APY means your money grows faster.
What to consider
- Use it to set realistic expectations when buying or selling a home.
- It can be a useful benchmark during negotiations.
- Make sure the appraisal report feels thorough and fair.
Real world scenarios
- Claire compares savings accounts at various banks by looking at APY. She picks the account offering the highest yield for her emergency fund.
- Kyle uses the APY metric to see how compound interest will boost his money over the course of a year.
- Penny chooses a 12-month CD with a higher APY to maximize returns, knowing she won’t need that cash immediately.
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