If you open a savings account with a deposit of $ 50,000 at an annual interest rate of 2% compounded monthly, you will increase your account balance from $ 5,253.94 to $ 55,253.94 over a period of time. of 5 years. This increase in balance includes the payment of interest on any interest you have already paid. Compound interest will increase your interest income by $ 253.94 to $ 5,253.94 compared to the $ 5,000 you would have received in simple interest without capitalization.