What Is 'Power' Of Compounding? Know This Wealth Creation Formula

There is an often-spoken quote that Albert Einstein once said compound interest is the eighth wonder of the world. Well, whether he said this or not, could be a matter of debate, but the power of compounding with compound interest, is a lesson for those who want to understand management of their personal finances. Before going into the ‘power’ of compounding, first understand what compound interest is. Compounding interest, also known as ‘interest on interest’, refers to the interest accrued on the initial deposit including all of the accumulated interest. Simply, compounding means you not only receive the interest on the basic principal amount, but also on the interest that keeps getting added to it.