Savings that grow faster each year

In the picture

1. 1Starting savings: the first pile of plain coins
2. 2First year’s interest: a small new layer added on top
3. 3Later year’s interest: a much thicker layer on a bigger pile
4. 4The rising curve: growth that speeds up each year

Examples

• A savings account of 1,000 euros at 5% earns 50 euros in year one, but about 52 euros in year two, because it now pays on 1,050.
• Leaving birthday money in a bank for ten years gives far more growth in the last years than in the first.

Quiz: Savings that grow faster each year (Age 15)

1. 1

   When your savings earn interest, what happens to that interest?

   • It is removed at the end of each year, so your savings stay the same size
   • It is added to your savings, so it earns interest too
   • It is kept separate, so only your starting amount keeps earning interest
2. 2

   If you leave your savings untouched, how does a later year’s interest compare with the first year’s?

   • About the same, because it is always calculated on the starting amount
   • Larger, because it is calculated on a bigger pile of savings
   • Smaller, because the savings get used up over time
3. 3

   What happens to the growth of your savings the longer you leave them to grow?

   • It stays steady, with the same amount added every year
   • It speeds up, growing faster each year
   • It slows down as the savings get bigger

The answers, each with its explanation, are in the app. This lesson has left the free week, so its quiz is part of the subscription.