Getting Started with Compound Interest

Compound interest is interest earned on both your original deposit and on the interest that deposit has already earned. Over long periods, that snowball effect does most of the work.

The formula

The future value of a single deposit is:

A = P × (1 + r/n)^(n·t)

• P: the starting amount
• r: the annual interest rate (as a decimal)
• n: how many times per year interest compounds
• t: the number of years

Try it yourself

Use the compound interest calculator to see how regular monthly contributions change the picture.