Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. This causes your money to grow faster than with simple interest.
How often is interest compounded?
Compounding frequency varies: daily (banks), monthly (credit cards), quarterly, or annually (bonds). More frequent compounding means faster growth.
Why is compound interest powerful?
Compound interest creates exponential growth. Over long periods, even small differences in interest rates lead to dramatically different outcomes.
