---
title: "The Art of Compound Interest"
description: "This article discusses what is compound interest, why it is important and how you can leverage it in your life"
last_modified_at: 2019-12-15T16:20:02-05:00
categories:
  - Personal Finance
tags:
  - Compound Interest
  - Personal Finance
  - Finance 101
toc: true
---
> Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it. 

> <cite><a href="https://www.goodreads.com/quotes/76863-compound-interest-is-the-eighth-wonder-of-the-world-he">Albert Einstein</a></cite>

The word "Compound Interest" is powerful and give a person enough imagination related to wealth, finance independent and happy life. Back to reality, compound interest doesn't always come with happy ending. As Einstein wiesly stated, compound interest is like "two sides of a coin": people who understand and utilize it, may use it as a investment vehicle to gain more money; people who don't understand and utilize it, may play a role like a lamb to the slaughter. 

Compound interest is not a complex with simple formula: 

> [p (1 + i)^n]
p = principal
i = interest rate
n = number of compounding periods

For example, let's say Mike has $1000 dollors to invest, he put the money in bank with 8% interest rate annually. After one year, he would have `1000 * (1+5%)^1 = 1080` as the final result. Without touching your initial $1000, you'd earn $80 pretax after one year, that's good enough for you to have a nice dinner! 

But don't run away with Math and we don't have to apply Excel calculation as well, there are tons of website or app help you caculate compound interest for you.








Add The Art of Compound Interest
Add The Art of Compound Interest
