Simple vs Compound Interest?
Simple Interest
Interest is calculated only on the principal amount. Interest earned is not reinvested, so the interest amount remains constant each period.
Compound Interest
Interest is added to the principal, and future interest is calculated on the new total. This creates the 'compounding effect' where your money grows faster over time.
💡 Investment Tips
For short-term (under 1 year) savings, the difference between simple and compound interest is small. However, for long-term (3+ years) investments, compound interest is significantly more advantageous. Utilizing tax-advantaged savings accounts can also save on the 15.4% interest income tax.