How compound interest works…

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In simple terms, compound interest means earning interest on your interest on your interest, and so on. Compound interest is interest paid on the initial principal as well as the accumulated interest on money you have invested.

What compound interest means for super –
Superannuation is perfectly placed to benefit from compound interest because most of us have our superannuation money invested for decades, so the compounding effect happens automatically.

Compounding and debt –
Compounding may work in reverse for people with debt. Mortgage debt is the biggest loan that many people have in their lifetime, and the interest paid can be significantly reduced if borrowers make extra payments and let them compound.

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