What are compound interests in finance and how does it work?
In: Economics
Let’s say I give you a bonus cookie based on how many cookies you have in your lunch bag. I see you have ten cookies, and that earns you a free bonus cookie.
Instead of eating the cookies, you save them all.
Because you saved all the bonus cookies, eventually you have twenty cookies in your lunch. Twenty cookies means now you get TWO bonus cookies!
And so on and so on.
Soon you have so many cookies saved up, your bonuses get huge.
That’s compound interest.
Latest Answers