Sign in to run this tool. Sign in

Explain as Fable

Example Mina tucked a coin into the little brass box on her windowsill and agreed with her brother that she would not touch it for a year. “Let it sleep,” he said, tapping the lid. “Then we’ll see what it learns.” At first, the box was nearly empty and easy to ignore. But each month, Mina’s grandmother slipped in a few more coins from selling her herbs at the market. Mina began to notice the box grow heavier, its hollow ringing changing into a fuller sound when she shook it. Once a season, the shopkeeper down the lane opened it, counted the coins, and wrote a number on a slip of paper. The next time he came, he did not count only what had been added since before; he counted everything inside, including the little sum the box had gained last time. “It grows on itself,” he said, smiling. Mina waited and waited. She thought the coins would only grow by the same little bits each time, like a steady drip from a roof. But after some months, the added amounts were larger than she expected, as if the box had started lending help to its own contents. By the end of the year, she held more than the simple sum of her deposits. The smallest early coins had spent the longest time inside, and because they kept being counted again and again, they had quietly done the most work. Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods. In the story, the shopkeeper kept counting not just the original coins but the earnings already added to the box, so each new period had a larger base. That is why the growth started gently and then became bigger over time: the earlier interest itself began earning more interest.