how does compound interest work.
In: Economics
ELI3: Let me hold some money for a while and you will get extra, then later extra **of the extra too**!
ELI5: Simple interest = a bit of what you gave me. Compound interest = a bit of what you gave me and a bit of that bit. For example: Let’s use 10% a month interest. Let me hold your $10 (so I can use it) and a month later if you want it back I’ll give you $11. If I get to hold it another month it’ll go up not by $1 to $12 but by even more! If you want it back then you can get $12.10. After 1 year you’ll have $31.38. The magic really increases over time, so that in 10 years you’ll have **$927,090.69**!
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