so... compound interest...

james3333

does it mean that if i put £3,000 into an ISA this year.....and obviously get interest on it..... then next year another £3,000 will i get interest on 6,000?

macca64

If you invest £3,000 this tax year, at 5% interest you will have £3,150 at the end of the tax year, assuming it has been in there the whole year, so next year, assuming you invest another £3,000, you'll get interest on £6,150, so assuming 5% again, you'll have £6,457.50 after 2 years.

Obviously delays in depositing the money, will result in less interest being paid.

ManAtHome

Short answer is yes.

Long(er) answer is that compound interest is the interest you get in the second year on the interest you were paid in the first year (providing it was paid into the account).

Example 3,000 @ 5% gets you £150 interest. Second years you get 5% on 3,150 (157.70). So even without adding any more, you get slightly more interest every year.

You can of course keep adding 3,000 a year (until 2010 at present).

ManAtHome

Ok, so 5% makes it easier... LOL

james3333

Bloody Real!
Cheers Guys

hey_hey_3

So if I have £3150 including interest, I cam still put another £3000 in the next year rather than just £2850?

Hereward

hey_hey wrote:

So if I have £3150 including interest, I cam still put another £3000 in the next year rather than just £2850?

Yes you can still put £3000 into your Mini-cash ISA: interest does not count towards your annual limit.