A person invests $2000 in a savings account with 5% annual interest, compounded annually. How much will the investment be worth after 3 years?

Mon, 20 Apr 2026 03:07:36 +0000

**A person invests $2000 in a savings account with 5% annual interest, compounded annually. How much will the investment be worth after 3 years?**
This question is gaining thoughtful attention across the U.S. as more people evaluate small, steady investments in stable financial tools. With an annual interest rate of 5%, compounded annually, even a relatively modest $2000 entry can grow meaningfully over time—especially when viewed through the lens of long-term financial planning. **Why This Investment Trends Now**
Savings accounts with predictable returns are growing in popularity, driven by economic uncertainty and rising awareness of personal finance. Many Americans are re-evaluating how they grow savings beyond the basic checking account, especially in an inflationary environment. This investment model offers simplicity and clarity—ideal for curious, first-time investors seeking reliable growth without complexity. **How It Actually Works**
At a 5% annual interest rate compounded yearly, the investment grows as follows:
Year 1: $2000 × 1.05 = $2100
Year 2: $2100 × 1.05 = $2205
Year 3: $2205 × 1.05 = $2315.25
After three years, the account holds $2315.25. While modest in absolute terms, this growth reflects the power of compounding—interest earned each year adds to the principal, fueling momentum. **Common Questions About the Investment**
*Q: What is compound interest, and why does it matter?*
Compound interest means earning interest not just on the original amount, but on interest previously earned. This multiplicative effect accelerates growth over time, making even small, regular investments worthwhile.