Understanding Compound Interest
Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods. It's often called "interest on interest" and is the reason why starting to invest early makes such a dramatic difference.
The Formula
A = P(1 + r/n)^(nt) + PMT × ((1 + r/n)^(nt) - 1) / (r/n)
Where A is the final amount, P is the principal, r is the annual interest rate, n is the compounding frequency, t is time in years, and PMT is the periodic payment.