The ‘big thing’ with interest rates when investing: Britons urged to ‘start early’ | Personal Finance | Finance

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In an exclusive interview with Express.co.uk, financial expert Peter Komolafe explained the benefits of compounding, and how it works. He said: “Compound interest is the idea that you can invest, and you can get interest upon your interest.

“Typically, what happens in any example is if you invest £100 at the end of year one, having 10 percent return, that means you have £110.

“Compounding will mean that in year two, you’re going to get interest on £110, instead of the £100 you put in originally.

“So that snowballing effect that can have over a long period of time is actually quite staggering.

“There a lots of compound interest calculators on google that you can use that will really give you a good idea as to how much your money can work for you over a period of time.”

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He gave an example of someone who had no lump sum to start off with but decided to invest £100 a month over a 10-year period with annual average return of eight percent.

The eight percent return may seem adventurous, but he used this to demonstrate the impact compounding can have.

He explained if these £100 compounds yearly, the £100 a month over that ten-year period would be worth £18,000.

Mr Komolafe continued: “Over that period of time you would have only contributed £12,000.

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“So, you’ve now got £6,000 in interest and investment returns over that period of time and that just shows you compound interest is a big thing.

“Compound interest gets bigger with the bigger the amount is and the longer time you have to invest which is why it’s always important to get started early.”

With professional guidance, investing may prove to be a very valuable tool in setting one up for the future.

Before people may decide to invest, Mr Komolafe stressed the importance of learning the language.

On his YouTube channel Conversations of Money, Mr Komolafe aims to break all of the language down into simple English as a way to help people understand the fundamental principles.

Additionally, when looking to invest, it’s important for one to have a goal.

Mr Komolafe stated there has to be a “particular thing” which is the reason for wanting more.

He continued: “It may sound nonchalant in the beginning, but the reason why you’re investing is going to guide how you go about it.”





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