How do you calculate compound interest?

Use the formula A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounds per year, and t is years.

What is the best compounding frequency?

Daily compounding produces the highest returns. But the difference between daily and monthly is small.

How does compound interest help grow savings?

Your deposit earns interest. That interest gets added to your balance. Next period, you earn interest on the larger balance.

Is compound interest better than simple interest?

Yes. Simple interest pays only on your original principal. Compound interest pays on principal plus accumulated interest.

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Last updated: May 1, 2025

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