Growth that happens when the interest or returns an investment earns are added back to the original balance, so future growth is calculated on a larger and larger amount over time — growth on top of growth.
Simple interest pays you based only on your original deposit, forever. Compound interest pays you based on your original deposit plus everything it's already earned — so the amount you're earning interest on keeps growing every single year. It starts slow, but the snowball effect becomes dramatic over long stretches of time, which is exactly why starting early matters so much more than most people expect.
$10,000 growing at 7% a year is worth about $19,672 after 10 years — but $76,123 after 30 years. It didn't just triple over the extra 20 years; it grew nearly 4x more, because the later years are compounding on a much bigger base than the early years were.
Related Terms
📈 Watch your own numbers compound.
Try the Compound Interest Calculator →