Compound Interest
Interest earned on both your original money and the interest it has already accumulated.
What does compound interest mean?
Compounding is interest on interest. Over time it produces accelerating, curved growth — which is why starting early matters more than the amount you save. The same force works against you on debt.
Put it to use
Compound Interest — frequently asked
How do I calculate compound interest?
Use A = P(1 + r/n)^(nt): P is the starting amount, r the annual rate, n the compounding periods per year, and t the years. The gain over your contributions is the compound interest — growth earned on both principal and prior interest.
Does more frequent compounding make a big difference?
It helps, but less than the rate or time. Going from annual to monthly compounding at 6% lifts the yearly yield only from 6.00% to about 6.17%. Adding years or a higher return moves the needle far more than compounding frequency.