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[AD]Initially we get to know compound interest at school, we learn how to calculate it but we don’t completely understand what it is for. At first let us remind you what compound interest is. Compound interest is calculated on the balance owing plus any previous interest charges. Let’s not examine the kilometers of theory. Just allow me to illustrate. Let’s assume you can carry $100 on a deposit with a 12% of annual percentage rate. In a year you’ll get $112. It is quite clear. But if you deposit your money with a 12% interest compounded monthly you’ll get: 12% APR means 1% per a month, so in a month you will have $101. And then when compound interest will show its worth. You left your money on the account for the second month but now the interest is counted not of $100 but of $101. In two months you’ll get not $102 but $102, 1. In three months you’ll get $103, 0301, in one more month you’ll get about $ 104, 0604. In a year the sum will grow to $112, 68. Simple interest gives you a profit from the basic sum and compound interest gives a profit from the sum including interest you earned last month. Notice that the compound interest earned is considerably more than the corresponding simple interest.

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Saving is basically putting aside money or a way to utilize your present income for future use. One saves for several reasons such as for a college education, buying a new car, for a new TV set you wish to acquire in three to four months time, for down payment on a home, or to provide for yourself when retirement comes.
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