Interest earned on both your principal and previously earned interest.
Compounding is why starting early beats saving more later: growth itself starts growing. It works against you identically on debt — credit cards compound daily.
Formula: FV = P(1+r/n)^(nt)
Example: $10,000 + $250/month at 7% becomes ~$170,600 in 20 years; only $70,000 was contributed.
FAQ
What is Compound Interest in simple terms?
Compounding is why starting early beats saving more later: growth itself starts growing. It works against you identically on debt — credit cards compound daily.
How is it calculated?
FV = P(1+r/n)^(nt). Example: $10,000 + $250/month at 7% becomes ~$170,600 in 20 years; only $70,000 was contributed.