“Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t. Pays it.” – Albert Einstein
What Is Compound Interest?
Compound interest is when you earn interest on the money you’ve saved, and on the interest you earn along the way. In simple terms, when you save money, you not only receive interest in the savings, but you also earn interest on the interest itself. As a result, you get interest from each year that the funds stay in your bank account.
Compound Interest Formula
Compound interest also has its own formula. The formula calculates the future value of an investment by adding interest to both the principal and previously earned interest over time, compounding the growth with each compounding period.
So… what now?
Did you know that you can take advantage of your compound interest? You can take advantage of compound interest by reinvesting it. You can reinvest it into assets that have dividends. Some examples can be, divided stocks or mutual funds. At the end of the day, just make sure you are making money off of interest; not paying it.
