Warning: Compounding interest involves numbers. As I know not everyone appreciates the idea of doing maths, let’s rename compounding interest baby making.
I’ll skip the ‘how to make babies’ bit. You can talk to your parents about that. Let’s just say we humans are capable of having babies. You might call us ‘baby factories’. When our babies grow up, they too become baby factories. In turn, they have babies which become baby factories too.
From little things big things grow
In making babies, we are creating growing things, which go on to create more growing things, which go on to create more growing things… Our ability to create these growing things adds up fast which is why we have exponential population growth.
Money is a money factory
Money is also a growing thing. Money earns interest, which makes money grow. That growing pile of money earns more interest, which makes the pile grow bigger...you get the picture.
Compounding interest describes the growth of money.
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