What is the shortcut for compound interest for 3 years?

Okay, so you want a shortcut for figuring out compound interest over three years? I get it, who wants to mess around with all those complicated formulas? Honestly, I used to dread it. Remember that time I tried to calculate the interest on my grandma’s savings bond? A total nightmare!

There’s this rough way to estimate the difference between simple and compound interest for three years. I mean, it’s not perfectly accurate, but it’s way faster than doing the full compound interest calculation. Someone showed me this once, and I’ve been using it ever since, especially for quick mental calculations. It’s something like this: P x (R/100)² x [(300 + R)/100].

Let’s break it down. ‘P’ is your principal, the initial amount of money you’re talking about. ‘R’ is the interest rate – remember to use the number without the percentage sign (so 5% becomes 5, not 0.05). So, you just plug those numbers in, and – voilà – you get a pretty good idea of the extra money you’ll earn with compounding over three years.

But honestly, it’s still kinda clunky. I wish there was a simpler, even more intuitive way, something you could almost do in your head. I’ve looked for better shortcuts, maybe some cool online calculators, but I haven’t found anything significantly easier. I think that’s one of the reasons why understanding compound interest can feel a bit… overwhelming, you know?

Anyway, this formula above is a decent approximation. But, you know, use it wisely! It’s not perfect, and for larger sums of money, you might want to use a proper compound interest calculator to be certain. You don’t want to make a mistake with your finances, right? Besides, it’s always a good idea to double-check your work, especially when money is involved.