Simple interest

If an account pays what’s called **simple interest**, that means you *only* earn interest on the *principal*, that is, the amount of money you originally deposited.

Compound interest

If account pays **compound interest**, that means the financial institution will pay you interest *not only* on your original deposit but *also* on the interest your deposit has earned over time. With *compound* interest, your money grows more – and a *lot* faster!

Annual Percentage Yield (APY)

The rate of return on an investment, such as a deposit in an interest-bearing savings account, for a one year period.

Is the interest I earn taxable?

Yes. The interest you earn in your bank accounts is considered income, so it is taxable. The bank will send you a form at the end of the year that shows the total amount of interest you earned.

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