Simply put, compound interest is the interest earned on top of interest. Interest is added to the principal at the end of the compounding period (e.g. annually or monthly). In the following compounding period, the interest is calculated on a greater amount than the original principal.
Fun fact: Albert Einstein is said to have once labelled compound interest as the eighth wonder of the world!
Some are doubtful as to whether he said it or not. However, there is no doubting the fact that compound interest can seriously boost your savings. Benjamin Franklin, one of the Founding Fathers of the United States and still appears on the US $100 bill, said it even better: "Money makes money. And the money that money makes, makes money."
This is probably the easiest way of getting rich, seriously! By keeping hold of and reinvesting money earned through interest, savings can build momentum — meaning you’ll be earning interest on top of interest. Free money!
For example, imagine you have a $200 investment that earns 3% per year from interest. The table below shows that the interest received increases as the base amount expands. Think of compound interest as having a snowball effect on your savings!
1. Click the link to the read-only document
https://docs.google.com/spreadsheets/d/1oWl6_Hq-D_2SN1OL5GuzpQS8qsNrTWp5M4Hf520Cu68/edit?usp=sharing
2. Make a copy of this template for your own use
[Open document > File > Make a copy]
3. Use this template for your own personal use!
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