How does savings account interest work?

My mother told me I would get around 4% monthly interest on my savings account. Now I have a hard time believeing there isn't a catch to this because I'm about to obtain $20,000 and I did the calculations of getting 4% interest every month for 10 years and It came up to $2,128,000. I could easily keep that in savings for 10 years but then why wouldn't everybody have a ton of cash. Whats the catch?
How does savings account interest work?
First of all, like the above said, your mother is wrong. You DON'T get 4% a month, you get 4% a YEAR.





Also, you are RIGHT, you can easily save more than that, so DO IT!





Don't let them hold your money one whole year for just 4%. If you put money in savings accounts, banks will lend it to other people. You settle for 4%, which is bad for you, then other people get to borrow for a low interest, which is bad for the whole market, because more money means money is worth less, and cost of living goes up.





SO, if you keep money to yourself and save that up, you're making the banks BEG for your money, just wait until they offer something more (such as 10%). I keep my money out of banks, but $20,000 is a little hard to hide, so buy some gold and silver coins, it'll preserve the value over time (MUCH HIGHER THAN inflation and CD savings).
Reply:Your mother is mistaken. If she's found a savings account that pays 4 percent, that would be the ANNUAL yield, not the MONTHLY yield.





Four percent APY is a very good rate, by the way. My online bank just reduced their rate from 3.0 to 2.75, and most regular banks are paying less than half that.





You might find an even better rate if you put your money into a CD rather than a straight savings account. If you do that, though, you'll pay a penalty for early withdrawal, so make sure when you buy the CD that you're not planning to spend the money until the term is up.
Reply:It's 4% annually compounded monthly. 4% / 12 is what it is calculated at / month.
Reply:4% is the annual rate, not the monthly rate. Most banks are even lower.