Visualizing the Extraordinary Power of Compound Interest

Visual Capitalist  |

The power of compound interest is so compelling, that it’s been often called the “eighth wonder of the world”.

Find out why this concept is so fundamental to personal finance in the following infographic:

Visualizing the Extraordinary Power of Compound Interest

Think you already know how to use and calculate compound interest?

Check out this exercise created by Next Gen Personal Finance and see how you do. There are also many other free personal finance lessons available in the activities section of their website.

WHAT IS COMPOUND INTEREST?

Simply put, it’s interest on interest.

In the first compounding period, that interest is small – but in the long run, interest on interest is a big deal!

How interest compounds depends on three variables:

Interest Rate: The rate earned from savings or an investment
Time: The length of time money is left to compound
Taxes: The timing of taxation can make a big difference

LEARN MORE

Get free lesson plans and resources on personal finance from our co-founder Next Gen Personal Finance.

Be the first to see all future personal finance infographics by getting on Visual Capitalist’s free email list.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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