Compounding was once called Compound Interest, because its appeal comes from the interest your account earns, which is added to your account total and earns more interest. Investing is one way to make sure your money compounds over time.

The Power of Compounding
The power of compounding is visible as your money earns interest. The interest increases the total in your account, and that larger total earns more interest. You profit from what mathematicians call exponential returns. When this happens over and over, our savings and investments grow and wealth is accumulated.

Even at today's low interest rates, compounding makes a big difference over time. A $1,000 savings deposit at 3 percent compounded daily will grow to $2,460 in 30 years. Without compounding, the same deposit will be worth only $1,900 in 30 years. That's $560 extra!

Interest is determined by the amount we have saved or invested (principal), the rate we earn, and the length of time we can leave the amount invested.

To build maximum wealth to achieve your goals, you should:

• seek the highest rate available for the amount of risk you can tolerate (more information in the Investment section)
• seek the most frequent compounding period
• hold your investments for the long term (more information in Investing)

The good news is that you don't have to do the math! If you want to find what any amount will grow to at any interest rate over any period of time, use the Future-Value Calculator and the answer will be computed for you.

You can also figure out:

• how much you should invest today to reach a future goal with the Present-Value Calculator
• how much you should set aside each month to reach a future goal with the Annuity-Payment Calculator

And, if you love math, you can see how compounding works.