When you contribute ₦10,000 every month and earn 0.25% interest per month, the interest is not earned on the full ₦240,000 from day one. Each monthly deposit earns interest only for the months it remains invested.
A simple way to calculate it is:
Deposit
Months earning interest
Interest
Month 1: ₦10,000
24 months
₦10,000 × 0.25% × 24 = ₦600
Month 2: ₦10,000
23 months
₦575
Month 3: ₦10,000
22 months
₦550
…
…
…
Month 24: ₦10,000
1 month
₦25
Total interest:
10,000×0.0025×(24+23+22+…..+1)
The sum of 1 to 24 is:
24×25÷2=300
Therefore:
10,000×0.0025×300
=25×300
=7,500
Result (Simple Interest)
Total contributions: ₦10,000 × 24 = ₦240,000
Total interest: ₦7,500
Final value after 2 years: ₦247,500
If the investment compounds monthly (interest is added to the balance each month), the final amount will be slightly higher, about ₦248,200, giving total interest of roughly ₦8,200.
The difference is small because 0.25% per month equals only about 3% per year, so compounding does not add much over just two years.