Savings Interest Calculator
Calculate compound interest on your savings with our free calculator. See how your money grows over time with different interest rates and compounding frequencies.
Savings Interest Calculator
Understanding Compound Interest: Theory, Usage, and History
What is Compound Interest?
Compound interest is the addition of interest to the principal sum of a loan or deposit, where interest earned also earns interest. This creates a snowball effect where your money grows exponentially over time, making it one of the most powerful concepts in finance.
Compound Interest Formula:
A = P(1 + r/n)^(nt)
- A: Final amount
- P: Principal (initial deposit)
- r: Annual interest rate (decimal)
- n: Number of times interest compounds per year
- t: Time in years
History of Compound Interest
The concept of compound interest dates back to ancient Babylon around 2000 BC. The famous "Rule of 72" was first mentioned in Luca Pacioli's 1494 mathematical work "Summa de Arithmetica." Albert Einstein allegedly called compound interest "the eighth wonder of the world" and "the most powerful force in the universe."
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Quick Tips
- • Start saving early to maximize compound interest benefits
- • Higher compounding frequency increases returns
- • Regular contributions significantly boost growth
- • Consider inflation when planning long-term savings