## xoxo_devvie 2 years ago Explain the difference between a savings account earning simple interest and a savings account earning compound interest.

1. xoxo_devvie

@dumbcow @kropot72

2. dmezzullo

With earing compound interest i believe u earn more money than u would with just simple interest

3. dmezzullo

Is that right @dumbcow

4. dumbcow

yes that is true...with simple interest you earn a constant amount of interest each year with compound int you earn a constant rate....the amount increases each year as the balance increases

5. xoxo_devvie

so then it would be better to open up a compund interest account right?

6. dmezzullo

If u want more money then yes

7. dumbcow

say you have \$100 at 5% interest with simple int you earn \$5 per year with compound you earn \$5 1st year, then (.05*105) = \$5.25 the 2nd year and (.05*110.25) = \$5.51 the 3rd year ...

8. kobi

say you have \$100 at 5% interest with simple int you earn \$5 per year with compound you earn \$5 1st year, then (.05*105) = \$5.25 the 2nd year and (.05*110.25) = \$5.51 the 3rd year ...