What is the power of compound interest? Formula and Calculation

For customers who often save money, it is impossible not to know about compound interest. When everyone's interest and principal are added together. Then when will compound interest be born. So What is compound interest?? What is the formula to calculate compound interest? How powerful is compound interest in savings? Let us answer in the article below.

What is compound interest?

Compound interest, also known as compound interest, is simply understood as the amount of interest you receive plus the principal amount. At this time, compound interest will be calculated on a regular basis, then to the end of the term. The greater the amount of interest that is accrued to the principal, the greater the amount of compound interest that will be generated.What is compound interest?

Thus, compound interest will be generated when interest and principal are added together from the time of interest. Compound interest is generated when the total initial capital and the amount of interest you receive during the deposit term. Interest added in consecutive periods to the principal will generate compound interest. Also known as capital import.

Many customers say compound interest is "Interest to mother's child" "Interest interest". And this can be considered a key in long-term investment for customers. With a longer period of time, it will generate a lossless profit in the future.

What is the formula for calculating compound interest?

If many customers do not understand how to calculate compound interest. Here we will give you the formula for calculating compound interest. To calculate compound interest, follow the following formula:

DRAW = P* (1+r/n)^n*t

In there:

  • DRAW: Compound interest in the future.

  • P: Amount of code you deposit initially (Principal amount).

  • r: The interest you get every year.

  • n: The amount you receive and compound the annual principal.

  • t: This is the number of years that you have been able to borrow money from the bank.

So you can see that the things that affect compound interest are. The interest rate that you get, your initial principal amount, your deposit period and must have a regular frequency. Once you have applied these things, the amount of profit you will receive later will be extremely large.

What is the power of compound interest in savings investments?

In investment or savings, interest can be said to be a great power if you know how to take advantage. And knowing about these things will bring you a very high benefit and a great fortune later on. If you do not have perseverance, it will be difficult to wake up.What is compound interest?

In the first 1-2 years you will not be able to clearly see the effect of compound interest. But for a long time maybe 10 to 15 years. When you look back, you can see the huge power that compound interest brings when you know how to take advantage. If only people do not understand the power of compound interest. Here is an example for you to better understand this issue.

For example:

If you have 100 million VND in hand. And proceed to deposit in a bank for 10 years with an interest rate of 7%/year at that time. And with interest compounded with principal, how much money will you get? To calculate the interest rate, you apply the formula above:

  • V: 100,000,000 VND

  • r: 7%.

  • n: twelfth.

  • t: ten.

And from there you will receive the following amount of interest.

Compound interest = 100,000,000 * (1+7%/12)^(12*10) = 200,966,137 VND.

So you have seen when saving with an amount of 100 million VND. If calculated according to compound interest within 10 years. You will receive a total amount of 200,966,137 VND. Of that total amount, the amount of interest you will receive will be VND 100,966,137.

How to make the most of compound interest?

To be able to apply compound interest effectively. You need to follow the following to be able to take advantage of compound interest to the fullest.

Start time

For starters, there's a big jump in growth in your interest rates. To realize the power of interest rates, time is of the utmost importance. The sooner you start, the more interest you will receive. Therefore, if you really want to use this way, you will start saving as soon as possible.

Maintain it regularly

In the compound interest for the selection and implementation of an investment plan is indispensable. For this everyone needs to do it steadily and with particular perseverance without interruption. And in exchange for the renewal of principal with interest, this is intended to generate a huge amount of profit. Compound interest only appears when the principal and interest are renewed continuously. Everyone needs to know about this when doing it.

Choose a bank with a reasonable interest rate

As for choosing a bank with a reasonable interest rate, you should make the initial investment. When choosing a bank with a good interest rate, it will help to generate a larger amount of interest and quickly accumulate the total interest on the principal. From that can generate a huge amount of money.

How to save money with high compound interest

To be able to enjoy a high compound interest rate for a long time. Everyone needs to fully apply the following:What is compound interest?

  • Choose a bank with a high interest rate to deposit money.

  • Choose a savings package with a term of 10 years or more.

  • Maintain and implement regular savings without interruption.

  • Select the form of payment as principal and continue to deposit for the next term.

Which bank has the highest compound interest rate today?

As for choosing a bank to proceed with depositing, which many people are doing. Because the interest rate of any bank is high, it will lead to high compound interest. Here we will introduce to you some banks with the highest deposit interest rates today, specifically, please refer to the following:

  • Saigon Commercial Joint Stock Bank – SCB: 6.80%

  • Construction Bank – CBBank: 6.55%

  • Viet A Commercial Joint Stock Bank – VietABank: 6.5%

  • National Bank – NCB: 6.4%

  • Bac A Commercial Joint Stock Bank – BacABank: 6.2%

  • Kien Long Bank – Kienlongbank: 6.5%

  • Bao Viet Commercial Joint Stock Bank – BaoVietBank: 6.3%

  • Southeast Asia Commercial Joint Stock Bank – SeABank: 6.2%

  • Vietcapital Bank – VietcapitalBank: 6.2%

  • Vietnam Thuong Tin Commercial Joint Stock Bank – VietBank: 6.2%

  • Vietnam Export Import Commercial Joint Stock Bank – Eximbank: 6.3%

The above interest rates are for illustrative purposes only for the time being. This interest rate will be subject to change in the future. To be able to update accurate information, you can refer to the official website of that bank.


The above article provides you with information about What is compound interest?? The power of compound interest in saving money like this,.. With the above information we hope that it will help you in your deposit plan. If you have any questions, please leave feedback for thongtinbank.com to answer and support.