The Eighth Wonder of the World
Albert Einstein once famously called compound interest the "eighth wonder of the world," adding, "He who understands it, earns it... he who doesn't... pays it." This Interest Calculator demonstrates that power by showing exactly how your money grows when interest earns interest.
How Compounding Works
Imagine you invest $100 at 10% annual interest.
- Year 1: You earn $10. Balance: $110.
- Year 2: You earn 10% on $110, which is $11. Balance: $121.
- Year 3: You earn 10% on $121, which is $12.10. Balance: $133.10.
In just three years, you earned $3.10 "extra" just because your interest was compounding. Over 20 or 30 years, this effect becomes massive.
Why Frequency Matters
The more frequently interest is calculated (compounded), the more you earn.
A savings account that compounds Daily will yield slightly more than one that compounds Monthly or Annually, even if the interest rate is the same.