They say money talks, but when did you last hear what it had to say? We teamed up with social media illustrator InstaChaaz to listen in so we can get to know our money better. Check out the rest of our MoneyTalks blogs.
Money is fundamentally a social beast, so if you can get a bit of it together, it’s often only a matter of time before it begins to attract more. Here’s how:
Interest describes how fast your money will grow, or how much you have to pay to borrow your money. It’s pretty straightforward, so if you earn 10% interest on £10 then you’ll have £11. Likewise, if you borrow £10 at 10% interest, then you pay back £11 (though in real life there will be fees in addition).
But things soon get much, much more, erm, interesting. Think of interest as your money just getting started.
Once it’s hopped out of the bath, things get even more exciting.
Your money has already grown to £11, which means that the next time you earn your 10% interest it won’t just be on your initial £10, but also on the £1 of interest you’ve already earned – that’s £1.10. So, the next time you earn interest it will be on your £12.10. And so on.
In a nutshell, compound interest is the ability to earn additional interest on interest already earned, and it means that your money will grow exponentially if you leave it alone and just let the interest build up.
This is a super important and powerful concept for your long-term plans for how to grow your money.
Check out more of our MoneyTalks blogs.