Understanding the Impact of Simple vs. Compound Interest on Loans and Investments

💰 Interest can be earned from saving and investing, with two forms: simple and compound.

🔢 Simple interest is calculated only on the principal, while compound interest includes the interest added back to the principal.

💳 Using a credit card can lead to owing more than the initial cost due to interest.

💰 Simple interest earns a fixed amount of interest on the principal, while compound interest earns interest on the principal and previously earned interest.

🔄 Compound interest compounds monthly, increasing the principal and allowing for interest to be earned on top of interest.

🔍 Over time, compound interest can result in significant growth compared to simple interest, especially with regular deposits.

💡 The rule of 72 is used to calculate the time it takes to double money in compound interest accounts.

💡 Compound interest is better than simple interest when it comes to investing.

💡 Simple interest is usually best when borrowing money, as it is only charged on the principal balance.

💰 Each monthly payment is divided between interest and principal balance.

💳 Credit card interest compounds daily on any remaining balance.

💸 Accruing interest can quickly add up over time.

💰 Understanding how interest works is crucial for managing your finances effectively.

⏰ Time is a key factor in minimizing interest payments and maximizing interest earnings.

🔍 Finding the best interest rates is important when borrowing or investing.