Module 1 | Debt

Interest & Compounding

🤔 What is interest?

When someone lends you money, you have to pay the money back PLUS a percentage of the amount (which is called the interest).

🤔 What is compounding interest, and why is it important?


It’s the interest you earn on interest. For example, if you borrow $100 with an interest rate of 5% per year, after the first year you will need to pay back $105, and after the second year, you would need to pay back $110.05. 

🌱 Activity

Have a play around with the compound interest calculator linked below. Try putting in a few numbers and see how much they can grow over 10, 30 or 50 years! 

Next up we’ll take a deeper dive into the topic of credit cards and buy now pay later sites.