How does compound interest work?

Compound interest is interest earned on both the principal amount and the accumulated interest from previous periods. This means your money grows at an accelerating rate over time.

What is the compound interest formula?

The compound interest formula is A = P(1 + r/n)^(nt) + D[((1 + r/n)^(nt) - 1)/(r/n)] where A = Final amount, P = Principal, r = Annual rate, n = Compounding frequency, t = Time, D = Regular deposits.

How often should I compound my investments?

More frequent compounding (daily, monthly) generally provides higher returns than annual compounding. However, the difference becomes less significant over longer time periods.

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