Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods.

How Compound Interest Works:

• Principal: The initial amount of money invested
• Interest: Earnings calculated as a percentage of principal
• Compounding: Earning interest on both principal and accumulated interest
• Frequency: How often interest is calculated and added to principal

Compound Interest Formula:

• A = Future value of investment
• P = Principal investment amount
• r = Annual interest rate (decimal)
• n = Number of compounding periods per year
• t = Time the money is invested for (years)

The Power of Compound Interest:

• Small, regular contributions grow significantly over time
• Higher compounding frequency yields better returns
• Starting early has a dramatic impact on final amount
• Interest earns interest, creating exponential growth