Definition
Compound Interest
Interest earned on both your original money and the interest it has already earned.
Compound interest is interest calculated on your principal plus all the interest previously added. Over time this snowballs: growth is slow at first, then accelerates as the balance gets bigger. It is the engine behind long-term investing.
The same force works against you on debt. Credit card balances compound in the lender's favor, which is why high-interest debt is so expensive to carry.
Read the guide: The Power of Compound Interest: Why Starting at 25 vs 35 Makes a $400,000 DifferenceTry the Compound Interest Calculator