economy
This miracle turns £35k into a £100,000 pension
Worryingly, many Brits don’t understand it. That's a problem. Because if it isn't working for you, it may be working against you. So what is this miracle? Compound interest. It's what makes our savings, pensions and investments grow so forcefully over time. Put simply, it describes the process where you earn interest on the money you originally put away, then even more interest on the interest you've previously earned. And it keeps compounding, year after year, in what's called the snowball effect.
TL;DR
- Compound interest is crucial for the growth of savings, pensions, and investments.
- It involves earning interest on both the principal amount and previously earned interest.
- This compounding effect, known as the snowball effect, drives significant growth over time.