Simple vs. compound interest

Simple interest is calculated only on your original principal. Compound interest is calculated on your principal plus any interest already earned — so your money grows faster over time as interest itself starts earning interest.

A quick example

TZS 1,000,000 at 10% simple annual interest earns TZS 100,000 every year, flat. At 10% compounded annually, year one earns TZS 100,000 (same as simple), but year two earns 10% of TZS 1,100,000 — TZS 110,000 — and the gap widens every year after that.

Why time matters so much

The longer money stays invested and compounding, the larger the effect becomes — this is why starting to save or invest earlier, even with smaller amounts, often outperforms starting later with larger amounts.

Compounding frequency

Interest can compound annually, quarterly, monthly, or even daily. More frequent compounding, at the same stated annual rate, produces a slightly higher effective return.

Try it yourself

This app's Compound Interest Calculator lets you enter a principal, rate, term, and compounding frequency to see exactly how your savings could grow over time.