Most standard savings accounts compound quarterly...  But, some investments, like certificates of deposit (CD's) DO compound monthly.

But, there's one trick to this...  Banks can compound as often (or not often) as they like and they won't tell you how they're doing it -- UNLESS YOU ASK!  It won't make a lot of difference unless you have a big chunk of money...  But, crunch these numbers and figure out which is the best investment:

Invest $1000 at 3% compounded yearly (just once a year) for 10 years.

 

Invest $1000 at a lower rate, 2.98%, compounded monthly for 10 years.

Sure, it's only a few bucks, but every penny counts in the long run!   Which one was the better choice?

Compute the same investments, but make it $100,000 for 45 years...  Which is the better choice?

YOUR TURN:

If you invest $1,000,000 in an account paying 12%, how much will you have after 20 years if the account is compounded:

Yearly?

Semi-annually?

Quarterly?

Monthly?