As a species, we tend to remember inventions as the things that changed history. Fire, agriculture, architecture, the printing press, electricity, all of these led to immense leaps forward for humanity.
But what’s more difficult to get a grasp on is the impact that concepts and ideas had on our progress.
For instance, a very simple idea that loans can be made, and periodically interest can accrue on those loans has been with us since we first began planting seeds in the ground.
As communities became more advanced, so did the underlying idea. As government became more organised, so did the implementation of the idea.
That idea – compound interest, has had an instrumental impact on the development of civilisation.
Compound interest is a simple math formula
Compound interest is a type of loan where the accumulated interest is added to the principal moving forward.
Depending on what side of this relationship you’re on, things have the potential to go either very well or very badly for you.
Compound interest is calculated by multiplying the present balance by 1 plus the effective interest rate per period raised to the number of compounding.
