The more often interest is compounded, what is the effect on your interest earnings?

When interest is compounded more frequently, your interest earnings increase because each compounding period allows you to earn interest not only on your initial principal but also on any interest that has already been added to it. This process is known as "compound interest," and it results in a larger amount of interest being accrued over time.

For example, if interest is compounded annually, you earn interest once a year. However, if it is compounded semi-annually, quarterly, or monthly, you receive interest multiple times within that year, which accelerates the growth of your investment. The more frequent the compounding, the more often your interest is calculated and added to the principal, resulting in higher overall earnings.

This principle showcases the power of compounding in finance, emphasizing that more frequent compounding intervals lead to greater accumulation of wealth over time, highlighting the role of time and frequency in investment growth.