In other words, it’s the interest you earn on your interest.
Let’s say you have £1,000 in a savings account that provides an annual compound interest rate of 4%. At the end of the first month, your account would accumulate approximately £3.33 in interest, resulting in a total balance of £1,003.33.
At the end of the second month, the interest would be calculated based on this increased balance, adding around £3.34 in interest. This means your total balance would become £1,006.67.
As each month passes, the interest earned continues to compound, leading to a faster growth of your savings. Monthly compound interest provides an opportunity for your money to grow exponentially.
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