IMPORTANT FACTS- The effects of compound interest
The Millionaire curve demonstrates the effect of compound interest – if you save £2.65 a day from the age of 16 to 65 in a high interest account (9.45%) then you’ll have over £1,000,000. However, bear in mind that compound interest can have a similar effect on debt!
VIDEO- A short video that highlights the benefits of compound interest on savings.
Interest calculations
| P: amount borrowedI: annual interest rate (Always enter the percentage as a decimal)N: number of years Simple Interest = P x I x N Borrowing £100 at a 10% annual interest rate for 2 years means that you would owe £20 in interest. (100 x 0.1 x 2) = £20 Compound Interest Can be found in the savings section. |
TRIVIA
The sci-fi writer Douglas Adams parodies compound interest in his novel, The Restaurant at the End of the Universe. The restaurant’s bill can be paid by depositing a penny in any bank account of the present time: by the end of the universe, the compound interest on that penny over the course of 170 quintillion years will be enough to pay the extremely high bill.