If money is left in a bank or building society for more than one year, then the amount of interest earned has to increase.
Remember - this is simple interest. It is different from compound interest which is taught at Credit Level.
Here's an example of how to calculate simple interest over multiple years
Darren leaves £350 in his building society account for 3 years. The account paid interest at a rate of 8% per annum. How much does he have in his account after 3 years?
Interest for one year = 8% of £350
Interest for three years = 3 x £28
New balance = £350 + £84
After three years Darren will have £434 in his account.
Morag earns 4.5% interest per year on the money she has saved in her bank account. She starts off with £200. How much is in her account after 5 years?
Interest for one year = 4.5% of £200
Interest for five years = 5 x £9
New balance = £200 + £45
After 5 years Morag will have £245.
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