Albert Einstein is widely rumored to have once said that "the most powerful force in the universe is compound interest.”
What is compound interest?
The term compound interest, also called as the 8th wonder of the World, is a standard word in economics and finance. It is the process of adding interest to the initial amount of an investment, and from then on earning further interest on this new amount. This is distinct from simple interest, in which the rate is applied once to the initial amount and then multiplied by the term of the investment.
Compound interest is a key way to grow savings. It works when interest is paid on interest. This leads to exponential growth over time.
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