Compound interest for savings

When you save money in an account that earns compound interest, you earn interest on both the money you initially deposit (the principal) and the interest that accumulates over time. This means your savings grow faster because you’re earning “interest on interest.”

• Principal: The initial amount of money you deposit.
• Interest rate: The percentage at which your money grows annually.
• Compounding: The process of earning interest on both the principal and the accumulated interest.

Compound interest for debt

When you borrow money and the interest is compounded, you end up paying interest on both the initial amount borrowed (the principal) and the accumulated interest over time. This can make your debt grow faster if not managed properly.

• Principal: The initial amount of money you borrow.
• Interest rate: The percentage at which your debt grows annually.
• Compounding: The process of accruing interest on both the principal and the accumulated interest.

This information is of a general nature and is not intended as personalised financial advice. RIVAL Wealth is a Financial Advice Provider (FAP) licenced by the Financial Markets Authority to provide financial advice. Our disclosure document is located at rivalwealth.co.nz or a written copy is available on request