Simple & Compound Interest & The Rule Of 72

Compound Interest

What is better than simple interest?  Something called Compound Interest.  Not only will you earn money on what you have saved, but you also earn money on the interest you received on that money (if you leave it in the bank).  Let’s take that $500 you put into your bank.  If you don’t touch it for five years, your account would be worth, $634.14.  This would be compared to $625.00 if you only had simple interest, not compound interest.  Furthermore, if you continue to add money each year to your account, say $100 per year, by the end of five years your account would be worth $1,218.33.  Your money keeps growing as long as you don’t touch it.  If you want to calculate your compound interest, here is a site that provides you with a compound interest calculator:

http://www.webmath.com/compinterest

http://www.econedlink.org/interactives/interest.html