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

AUTHOR
LCEF