Ben invests $2,000 in a savings account with an annual interest rate of 5%. How much money will he have after 3 years if the interest is compounded annually?

Mon, 04 May 2026 22:07:51 +0000

**How Much Will Ben Have After 3 Years in a 5% Compounded Savings Account?**
Ben invests $2,000 in a savings account with a 5% annual interest rate, compounded yearly—how much could he expect after 3 years? This question reflects growing interest in smart, low-risk ways to grow savings amid steady interest rates and shifting financial habits. With inflation and cost-of-living pressures on the rise, many U.S. savers are turning to simple, reliable accounts to preserve and build wealth. Compounding interest offers a proven path to growth—proving prioritized by people like Ben seeking measurable returns without complexity. Why Ben chooses to invest $2,000 at 5% annual compound interest speaks to broader trends in personal finance: transparency, patience, and steady progress. While not a rocket fuel return, this rate offers steady growth over time—particularly attractive when evaluating safe, liquid options. The 5% rate reflects current offerings at many U.S. financial institutions, balancing risk and reward for cautious investors focused on capital preservation with growth. How does 5% compounding actually work?
For Ben’s $2,000 investment, annual compounding means each year, interest is added to the principal and earns interest on the new total. After Year 1: $2,000 grows to $2,100. Year 2 adds 5% to $2,100 ($105), bringing it to $2,205. Year 3 adds 5% to $2,205 ($110.25), resulting in $2,315.25. This illustrates compound interest’s power—earning returns on returns over time. Common questions clarify the math:
**How is compound growth calculated exactly?** The formula is:
Future Value = Principal × (1 + rate)^years
So: $2,000 × (1 + 0.05)³ = $2,000 × 1.157625 = $2,315.25