Compound interest def came up in high school math. But when it comes to investing, compound interest is key.
We all have a vague memory of compound interest from our high school math days. But when it comes to investing, compound interest is key.
And as Albert Einstein said “compound interest He who understands it, earns it … he who doesn't … pays it”
Compound interest is the interest received on your initial investment - as well as the interest you’ve earned on that investment. And the interest you receive on that investment. It’s essentially interest on interest. Or as we like to call it, interest inception.
And this process will continue (i.e. compounds) until you pull your investment out.
If you want to do your own calculations, the formula for compound interest is FV = IV(1+r/n)ⁿᵗ, where:
But there are tonnes of online calculators available so you can figure it out. The Government’s MoneySmart website has its own you can check out for free.
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