Calculating Wealthfront’s 0.5% APY Boost

Wealthfront is known for its very generous APY on its Cash Account – currently 3.80%, which is one of the highest in the banking business. But did you know that you can earn an even higher yield? With Wealthfront’s refer-a-friend program, you can earn a 0.5% APY boost for three (3) months as a new user, and an additional 3 months for each friend you invite.

So how much is that 0.5% APY really worth? Maybe not as much as you think.


First, quickly, let’s recap the difference between APY and APR. APY (annual percentage yield) is the annual rate of return on an investment (such as a checking or savings account), while APR (annual percentage rate) is the annual cost of borrowing (such as on a car loan or mortgage), including the interest rate fees. So for our purposes, APY is what matters.

How much you can earn with 0.5% APY

First, it’s important to note that the Wealthfront sign up bonus gives you 3 months of boosted APY; so with a baseline of 3.8%, the APY becomes 4.3% for those three months. Let’s say we’re high rollers, and want to deposit $20,000 into our new Wealthfront account

To calculate how much interest we’d earn on an investment of $20,000 at an APY of 4.3% over a period of 3 months, we can use the following formula:

Interest earned = (Investment amount x APY) x (number of months / 12)

Plugging in our values of $20k and 4.3%:

Interest earned = ($20,000 x 4.3%) x (3 / 12)  = $157.50

So we would earn $157.50 in interest on an investment of $20,000 at an APY of 4.3% over a period of 3 months.

But how much of that comes from the boost? To figure that out, let’s just isolate the 0.5%, which gives us the following calculation:

Interest earned = ($20,000 x 0.5%) x (3 / 12) = $25

So the end result is: With Wealthfront’s 0.5% APY boost, you can earn an extra $25 on an investment of $20,000 over the period of 3 months, after which the boost will disappear.

So is Wealthfront’s APY boost worth it?

Probably not. If you are an existing Wealthfront user and have a lot of money in your Cash Account, the dollars can add up quickly. That’s why it’s a great idea to start inviting friends to join the platform — according to their rules, you can stack up to 12 months of boosted APY at a time.

But if you are a new user, it is likely that this is not the best deal. Wealthfront offers a $30 sign up bonus to new Cash Account users when they fund it with $500 or more. Since the breakeven point for the APY boost is a $24,000 investment, the majority of new users are likely to earn more by just taking the $30 bonus.

What do you think? Did you take the $30 sign up bonus or the 0.5% APY boost when you signed up for Wealthfront? Let us know in the comments below.