⚖️ Compound vs Simple Interest
📚 Compound Interest Guide
🎯 What is Compound Interest?
Compound interest is interest calculated on the initial principal and the accumulated interest from previous periods. It's "interest on interest" that can significantly accelerate investment growth.
📏 The Formula
A = P(1 + r/n)^(nt)
- A = Final amount
- P = Principal (initial amount)
- r = Annual interest rate (decimal)
- n = Number of times interest compounds per year
- t = Time in years
⚡ Compounding Frequency Impact
- Daily: Highest returns, minimal difference from continuous
- Monthly: Good balance of returns and simplicity
- Quarterly: Common for savings accounts
- Annually: Simplest but lowest returns
💡 Tips for Maximizing Growth
- Start investing early to benefit from time
- Make regular contributions consistently
- Choose accounts with higher compounding frequency
- Reinvest dividends and interest
- Be patient - compound interest accelerates over time