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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Compound interest is just the principal that interest earned in one year also earns interest in subsequent years if you allow it to just be added to the pot.
You have $100 earning 5% annually. At the end of the year you have $105. In year two, that $105 earns 5% interest, or $5.25 in interest. In year 3, you have $110.25 earning interest. And so on… While only a small difference early on, as the interest grows over time, the amount of benefit from compounding grows, too.
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