Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Understanding the basics of this powerful mathematical tool can ...

Simple interest calculates earnings or payments based solely on the initial principal, while compound interest grows by calculating interest on both the principal and the accumulated interest over ...

The key to taking advantage of compound interest is getting started early! Interest alone is calculated just on that original amount, but compound interest allows your money to grow faster over time.

Daniel Jassy, CFA, is an Investopedia Academy instructor and the founder of SPYderCRusher Research. He contributes to Excel and Algorithmic Trading. Compound interest is interest that's calculated on ...