![]() ![]() However, in the second year, the amount of interest you’d earn would increase, even if the annual interest rate stayed the same. When you put money in a savings account, you expect to earn some interest on your money.įor example, if you were to put £1,000 in your savings account at an annual interest rate of 2.4%, you’d earn £24 in interest in the first full year. Interest on interest – compound interest explained So, what is compound interest? How does it work? And how can you make it work to your advantage? “He who understands it, earns it he who doesn’t, pays it,” said the Nobel laureate. Is it light? A black hole? Photons? No – the award-winning scientist was talking about ‘compound interest’ which he called the ‘eighth wonder of the world’. Considering his work is among the most celebrated and renowned in science, it’s worth listening to Albert Einstein when he describes the ‘most powerful force in the universe’.
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