I don’t understand it like at all. I’ve heard it’s beneficial moneywise but I don’t understand why or how to invest in compounds??
Reading online it seems that it’s beneficial however that’s all I seem to understand so if it is something to look into and invest in I’d like to Understand it better 🙂
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Imagine for a moment that you find a bsank that will pay you 100% interest per year. Their brochure says put £100 in today and next year we’ll add £100!
It’s a wonderful deal and you put your money in. One year later the interest gets paid and you immediately withdraw the interest and have a proper night out. You leave the original money in because next year you can do it again! After 5 years you close the account, pocket your original £100 with a big smile and remember your 5 free nights out…
Meanwhile your twin started out the same way but didn’t fancy the nights out (probably because you took them with you cos you’re nice) so they just left the interest in the same account and every year it doubled. When your twin closes their account they need a suitcase .. because .. 100 became 200 became 400 .. 800 .. 1600 … £3200.
That’s the difference .. 2% is a much smaller return .. but it still works the same way .. it just takes longer to get to the big numbers.
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