Alex invests $5000 in a savings account with an annual interest rate of 5%, compounded annually. How much money will he have in the account after 3 years?

Mon, 04 May 2026 17:26:43 +0000

**Why More Americans Are Exploring Early Savings with 5% Compound Interest**
In a year marked by shifting economic patterns and rising focus on financial preparedness,很多 US households are quietly reviewing how small, consistent investments can grow. The query *“Alex invests $5,000 in a savings account with a 5% annual interest, compounded annually. How much will he have in 3 years?”* reflects this growing curiosity. While interest rates have varied nationally, 5% remains a strong benchmark for safe short-term deposits—offering steady growth without market risk. This routine question signals a broader interest in long-term financial habits, especially as people seek reliable ways to build wealth in uncertain times. **Why Alex Chooses This Savings Strategy**
People choose a 5% compounded annual savings account for simplicity and predictability. Unlike volatile investments, this option provides a guaranteed return without complexity or risk. Alex’s decision aligns with a common goal: maximizing capital growth through disciplined saving, even on moderate sums. Compounded interest accelerates returns each year by adding previous earnings to the principal—turning small principal into meaningful momentum over time. This approach feels approachable and secure, making it ideal for those building financial confidence. **The Step-by-Step Breakdown: What Really Happens**
When Alex invests $5,000 at 5% annual interest, compounded yearly:
Year 1: He earns $250, bringing the balance to $5,250
Year 2: Interest on $5,250 yields $262.50, totaling $5,512.50
Year 3: Earnings reach $275.63, reaching $5,788.13 The total grows gradually, with each year’s return added to the previous sum—not just the original principal. This compounding effect means the principle grows faster than simple interest would allow, showing how time and consistency create meaningful value.