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Compounding – “The most powerful force in the universe.”

So just what is compound interest?

You may already be familiar with the concept of earning interest such as through your bank account. You put in £1000, the bank pays you say 2% per year and at the end of the year you’ve earned £20.

It doesn’t sound much I know. However, compound interest refers to the interest you then earn on that £20, so you have earned interest on your interest. This means even if you didn’t put more money into the bank, the amount you earn increases each year.

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