Best Compound Interest Accounts

Grow your compound interest accounts with M1 Finance and get 5.00% APRY on high-yield savings accounts.

Watching your portfolio grow over time is exciting. But what if you could speed up that growth without lifting a finger? A compound interest account offers an effortless way to increase your investment. Through compounding, the interest you earn generates its own return. Read on to find out how to make compound interest accounts part of your investment strategy. 

9 Best Compound Interest Accounts

Check out Benzinga’s top picks for the best compound interest accounts. 

• Best for Easy Access: High-Yield Savings Accounts
• Best for Longer-Term Savings: Certificates of Deposit (CDs)
• Best for Flexibility: Money Market Accounts
• Best for Long-Term Growth: Retirement Accounts
• Best for Low Risk: Bonds
• Best for Safe Investments: Treasury Bills (T Bills)
• Best for Diversification: Exchange-traded Funds (ETFs)
• Best for Additional Income: Dividend Stocks
• Best for Real Estate Investing: Real Estate Investment Trusts (REITs)

1. Best for Easy Access: High-Yield Savings Accounts

A high-yield savings account typically pays a higher interest rate than a traditional one. With a compound interest account, your earnings increase the balance in your bank account. With a higher balance, you will earn more next month. Funds held in high-yield savings accounts are easy to access and Federal Deposit Insurance Corporation (FDIC) insured.

Average interest rate: 4.5% - 5.0% APY

Benzinga's favorite high-yield savings account: M1 Finance is offering 5.00% APY on its high-yield savings account.

2. Best for Longer-Term Savings: Certificates of Deposit (CDs)

With a certificate of deposit (CD), you invest a set amount of money for a specified time in exchange for a fixed return of interest. CDs are an attractive option for longer-term savings as they pay higher interest rates and encourage you to keep the funds in your account. 

Average interest rate: The average CD yield for June 2023 is 1.72% APY.

Benzinga's favorite CD: BMO U.S. offers 5.10% APY on its 12-month CD with no minimum deposit required.

3. Best for Flexibility: Money Market Accounts

A money market account combines the benefits of checking and savings accounts. You earn interest on the money in your account but can use your funds like a checking account. If your money market account compounds interest, the interest earned continues to make money.

Some money market accounts base your interest rate on how much you have in your account. You may have to keep a minimum balance, such as $5,000 to $10,000, to qualify for a higher rate.

Average interest rate: June's average money market yield is 0.32% APY.

Benzinga's favorite money market account: Ally Bank offers a 4.15% APY on its money market account with no minimum deposit requirements.

4. Best for Long-Term Growth: Retirement Accounts

Compounding interest can add much value to retirement accounts, such as IRAs and 401(k) plans. The earnings from your contributions are reinvested and generate their own returns. Since you hold funds in your retirement account for years, compounding can be a powerful way to grow your investment, especially if you started saving when you were younger.

Average interest rate: The average rate of return depends on the type of assets held in your portfolio. The average annual return of retirement accounts ranges from 5.75% to 9.45%, depending on your investment strategy.   

Benzinga's favorite retirement account brokerage: Charles Schwab offers a variety of retirement accounts. TD Ameritrade doesn’t require a minimum initial deposit to open a retirement account and does not charge maintenance fees.

5. Best for Low Risk: Bonds

Bonds typically pay simple interest. However, you can realize the benefit of compound interest investments by purchasing more bonds with your earnings. The more bond principal you have, the more interest you earn.

Average interest rate: The average yield of a 10-year government bond is 3.742%.

Benzinga's favorite broker to invest in bonds: Interactive Brokers has an easy-to-use platform that provides the broadest access to government, municipal and corporate bonds.

6. Best for Safe Investments: Treasury Bills (T Bills)

A Treasury bill (T Bill) is a government security with a maturity of less than one year. You buy T Bills at a discount but receive the total face value when they mature. Given their short maturity, you can realize the compound interest effect by reinvesting the total amount you receive.

Average interest rate: Interest rates vary based on the T Bill's term. The T Bill rate ranged from 4.49% to 6.02% in May. Interest rates for a 1-year T Bill range from 4.59% to 5.25%.

Where to buy Treasury Bills: You can purchase new issues of T Bills at government auctions at the TreasuryDirect site. You can also buy them through your bank or a licensed broker on the secondary market.

7. Best for Diversification: ETFs

An exchange-traded fund (ETF) is a pooled investment with multiple securities. Assets within an ETF may span numerous industries and companies, which helps manage risk. Some ETFs carry investments that pay dividends. Reinvesting these dividends is a simple way to grow an investment. Like compound interest, buying more shares increases your holdings in the ETF.  Future dividend payments are calculated on a larger investment.

Average interest rate: The average ETF return is 10%. 

Benzinga’s favorite investing app for ETFs: Interactive Brokers' "fee waived" no transaction fee program offers over 150 ETFs, which reimburse IBKR Pro clients for commissions paid on ETF shares held for at least 30 days. IBKR Lite clients pay $0 commissions on ETFs. 

8. Best for Additional Income: Dividend Stocks

Dividend stocks are shares of companies that pay investors some of their profits at regular intervals. You can reinvest dividends earned by purchasing more shares. Many dividend stocks come from established industries, such as banking and utilities.

Some companies offer dividend reinvestment plans (DRIPS). With a DRIP, dividends are automatically reinvested by purchasing more shares. The compounding effect of a DRIP can accelerate the growth of your investment. Plus, you may be able to buy fractional shares and pay no commissions under a DRIP.

Average interest rate: The average dividend yield from March 2023 was 1.66%. 

Benzinga’s favorite brokerage account for dividend stocks: Webull is an innovative trading platform where investors can find, research and make trades. Webull offers commission-free trades and no deposit minimums.

9. Best for Investing in Real Estate: REITs

A REIT may be attractive if you are interested in real estate but don’t have the time or money to invest. Investors buy shares in real estate portfolios through a real estate investment trust or REIT. 

REITs typically have higher returns as they must pay their shareholders 90% of net earnings. Shareholders receive dividend payments made up of rental income and capital gains. Many REITs offer DRIPs so you can automatically reinvest your dividends and grow your investment faster. 

Average interest rate: The average dividend yield was 4.45% in April 2023.

Benzinga’s favorite investing app for REITs: RealtyMogul is a sophisticated trading platform with various analytical and research tools. RealtyMogul is user-friendly and boasts a wide range of tradable REITs.

What is a Compound Interest Account?

Compound interest is an important concept to understand about your personal finances. With a compound interest account, you earn interest on the entire balance in your account, not just what you deposited. Since your earnings add to your investment, they generate future returns.  

Traditional Savings Accounts vs. Compound Interest Accounts

A traditional savings account calculates your earnings using a simple interest method. Interest calculates only on the funds you have deposited. Alternatively, compound interest accounts calculate interest on your entire balance. The money you earn makes more money.  

Grow Your Portfolio with Compound Interest Accounts

A key source of gains for your portfolio is interest. When your savings use this interest to further grow over time, you can realize higher earnings. When you incorporate compound interest accounts into your investment strategy, you can accelerate your portfolio's growth.

For more ways to invest check out the top brokerage accounts below.

Frequently Asked Questions