The compound interest effect can explain how little sums become big sums quicker than expected. Indeed, it can even be worth investing small sums in an investment fund. For one thing, you would have better prospects of making a return than with a savings account, and then you have the compound interest rate itself.
Compound interest ensures that the amount saved increases at a disproportionately high rate. This compound interest effect is based on the principle that the longer the term of a financial investment, the stronger it gets. This may all sound complicated, but it is in fact a very simple principle. If you re-invest interest (or returns) from an investment, you will accrue further interest/returns. The longer you spend investing these returns based on this principle, the greater the compound interest effect. Still sound complicated? Let’s see how the people we asked about compound interest on the street fared.