Compound Interest Calculator
What is Compound Interest?
- The compound interest is a calculation formula by which the simple amount of the first year is added to the initial amount, which in turn will also accumulate interest in the following year, which is then added. And so on…
The main advantage that compound interest comes with is that it helps you save more money from one time frame to another. Here is how:
Imagine you want to save money through a bank deposit.
At the end of each contractual period, to the amount of money you initially had, will be automatically added the simple interest with which you agreed when you made the investment.
If you decide that you do not want to withdraw the money and you reinvest the entire amount, at the end of the next stretch you will have received interest both for the initial amount and for the interest accumulated in the previous interval.
This effect is called cumulative interest or interest on interest. With its help, the amounts saved will increase exponentially from year to year. And in practice, you will be able to put more money aside than if you had calculated only the simple interest on the amount initially deposited.