However, with compounding on your side, you would still earn £250 in year one, but this would be added to your total at the start of year 2. After 10 years, you would have amassed a total of £2,500 in interest payments. For example, if you were to invest £5,000, at an annual simple interest rate of 5%, you would earn £250 each year. Einstein referred to compound interest as the eighth wonder of the world.Ĭompound interest is different to simple interest in that you the saver will earn interest on interest. Please also take a look at our other helpful savings calculators such as the Junior ISA Calculator.Īlbert Einstein’s compounding interest definition was ‘The Eighth Wonder of the World’. Fund charges or inflation have not been taken into account for this calculator. It illustrates the effects of continuous compounding and the power of regular monthly savings over time. This is a compound interest calculator savers can use to get an idea of how returns and compound interest can work in their favour over the long term. Adjust the lump sum payment, regular contribution figures, term and annual interest rate. Use the compound interest calculator to see the effects of compounding and interest rates on a savings plan. Wondering how your savings account works? The power of compound interest means you earn interest on interest.
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