What is Compound Interest?
💡 Compound Interest = Interest on Interest.
Unlike simple interest, where you earn only on your principal, compound interest allows you to earn interest on the interest you’ve already accumulated.
This 'snowball effect' is the key to building significant wealth over time.
Key Factors
Frequency
How often interest is added (Monthly/Yearly).
Time
Longer time = Exponential growth.
How It Works
The formula for annual compounding is:
A = P(1 + r/n)^(nt)
AFuture Value
nCompounding Frequency
How to Use
- Enter Principal
- Add Regular Contribution (Optional)
- Set Rate & Time
- Select Frequency
Growth Scenarios
The Coffee Habit
Investing $5/day at 10% for 30 years grows to over $300,000.
Invested
$54k
Value
$340k
💰 Small sums strictly compounded create wealth.
FAQs
❓ Simple vs Compound?
💡 Compound creates wealth faster.
Benefits
- ✓Motivation to save early
- ✓Visualize exponential growth
Terms
- •Assumes constant rate.
- •Tax not deducted.