I talked to my Mom about compound interest this weekend. She agreed that it is a good way to have your money work for you, but she also said that it is hard to see a difference if your interest amount is low and you don’t have a big number to start with and you aren’t adding to it regularly.
We then tried an exercise using an online calculator below:
| Compound Interest Calculator | |
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We started with the money I have in a savings account in Washington DC. We assumed we kept it for 5 years when I will done with high school.
After this exercise we went to the Moodlic calculator, went back online for the calucation and used this formula make the problem:
M = P( 1 + i )n
M is the final amount including the principal.
P is the principal amount.
i is the rate of interest per year.
n is the number of years invested.
Applying the Formula
I have $7000.00 to invest for 5 years at rate of % compound interest.
M = 7000 (1 + 0.0135)5 = $1157.62.
SO, 7000*1.0693=
So my $7000.00 is worth $7485.43.