Compound interest is when the money made from investments, or the the growth of an investment, is immediately reinvested. If an investment of $100 have an average growth of 10%, the value would be $110 in a year. That’s an increase of $10. The next year, the investment would grow 10% again. But this time, it would be 10% of our $110 principal, which is an $11 increase.
After a few years, you will notice the growth starts to curve up. The biggest impacts of compound interest comes in the last few years of the investment. Try some of our examples below to see how much of an impact the power of time can have over money.