Compound Interest: How Money Grows Faster Over Time
by Froga
An introduction to how compound interest works and why it grows savings and loans faster than simple interest. Good for anyone curious about the maths behind saving, borrowing or investing.
Compound interest means you earn interest not only on the money you first put in, but also on all the interest that money has already earned. Each time period, the interest gets added to the balance, and the next period's interest is calculated on that larger amount. This is different from simple interest, where interest is always calculated on the original amount only. Because of this, a balance earning compound interest grows faster the longer it is left untouched - the growth curve gets steeper over time rather than staying a straight line.
What is compound interest?
multiple choice
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