Let's say you invest $1,000 in a savings account that earns 5% interest per year. This can result in exponential growth over time, making it a powerful tool for long-term investments. In other words, it is interest on interest. In this section, we will introduce you to compound interest and explain how it works.Ĭompound interest is the interest that is earned on the initial principal amount as well as on any interest that has been accumulated. It is a powerful tool that can help you grow your wealth over time, but it can also be confusing to understand. Compound interest is a financial concept that can be both exciting and intimidating.
