Investing
Compound interest: how money multiplies and why time beats amount
The formula in plain words, the rule of 72 and calculations that show why ten years of head start matter more than the size of your deposit.
Interest capitalisation: what it means
Interest capitalisation means adding earned interest to the deposit balance, so future interest is calculated on a larger amount.
Capitalisation is a deposit term under which earned interest is not paid out separately but added to the deposit balance. Next time, interest is calculated on the larger amount, which is how compound interest works.
The more often capitalisation happens (monthly, quarterly, yearly), the higher the total return at the same rate. That is why banks often quote an effective rate: it shows the real annual return with capitalisation included.
When comparing deposits, look not only at the rate but also at whether interest is capitalised and how often.
In detail, with examples: Compound interest: how money multiplies and why time beats amount
Related terms
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Loans and debt
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Calculations for a “0%” instalment plan, a loan with fees and a credit card, microloan limits and a checklist to compare two loans in 2 minutes.
Money basics
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Why the NBU raised the rate to 16.5%, how the decision reaches your deposit and loan, what +1 percentage point costs and when the next meeting is.