Personal Finance, World Changers

## Interesting Investing

February 24, 2015 | Posted by LCEF There are many calculators out there to help you project your earnings in an interest bearing investment or account (like your Y.I. StewardAccount®), including those on LCEF’s website. But it’s a good idea to know how to make those calculations yourself.

Simple Interest

Dollar Amount x Interest Rate x Length of Time (in Years) = Amount Earned

Example

• If you had \$100 in a savings account that paid 6% simple interest, during the first year you would earn \$6 in interest.
\$100 x 0.06 x 1 = \$6
• At the end of two years you would have earned \$12.
• The account would continue to grow at a rate of \$6 per year, despite the accumulated interest.

Compound Interest (use this to calculate your Y.I. savings)

(Original \$ Amount + Earned Interest) x Interest Rate x Length of Time = Amount Earned

Example

• If you had \$100 in a savings account that paid 6% interest compounded annually, the first year you would earn \$6 in interest.

\$100 x 0.06 x 1 = \$6

\$100 + \$6 = \$106

• With compound interest, the second year you would earn \$6.36 in interest.
• The calculation the second year would look like this:

\$106 x 0.06 x 1 = \$6.36

\$106 + 6.36 = \$112.36

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