The principle is simple: A rand invested at a 10% annual return will be worth R1.10 in a year. Invest that R1.10 and get 10% again, and you’ll end up with R1.21 two years from the day of your original investment. The first year earned you only R0.10, but the second year generated R0.11. And that is the basic principle of compound interest – gains on gains. Increase the time and the amount invested and the gains become more and more pronounced.
“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”
Albert Einstein
