Investing
Compound Interest
1 min read·Updated regularly
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Definition
Interest earned on both the original principal and on the interest that has already accumulated.
Reading time
1 min
Format
Concept
Category
Investing Section
ConceptsDefinition
Compound interest is why time is the most powerful lever in personal finance. Each period's interest joins the principal, so the base grows exponentially rather than linearly. Small, consistent contributions started early routinely outperform large, late ones.
Examples
• $100/month at 6% for 10 years ≈ $16,470 (contributions: $12,000). • $100/month at 6% for 30 years ≈ $100,450 (contributions: $36,000).
Key Takeaways
- Time matters more than amount.
- Consistency beats one-off deposits.
- The same math works against you with high-interest debt.
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