A bank offers a 5% annual interest rate compounded annually. If you deposit $1,000, what will be the balance after 3 years?

Tue, 05 May 2026 11:34:45 +0000

**How a Bank’s 5% Annual Interest Rate Compounded Annually Could Shape Your Savings Growth** Ever wondered what a 5% annual interest rate—compounded annually—on a $1,000 deposit could do for your money over time? With rising interest rates and intense focus on personal finance in the U.S., this familiar question is sparking curiosity among savers looking to grow wealth responsibly. Understanding how compound interest works isn’t just academic—it’s practical. In a climate where Americans are reevaluating savings strategies and searching for reliable ways to boost income outside traditional wages, knowing how interest builds can redefine financial decisions. A bank offering a 5% annual rate compounded annually means your $1,000 deposit earns 5% interest each year, but with a twist: the interest isn’t just earned once. Instead, each year’s interest adds to the principal, so next year’s total grows even faster. This compounding effect turns steady savings into meaningful long-term gains.