How to use it
- Use the formula below with your own figures.
The formula
Interest = principal × rate × time.
Worked example
$1,000 at 5% for 3 years earns $150.
Frequently asked questions
When is simple interest used?
Short loans and some bonds.
Simple vs compound?
Compound earns more over time.
Tips
- Time in the market beats timing the market.
- Reinvest returns to let compounding work.
- Keep fees low — they compound against you.
Key terms
- Compounding
- Earning returns on past returns.
- CAGR
- The smoothed annual growth rate.
- Yield
- Income as a percent of price.