Building Compound Interest
How Compound Interest Builds Wealth Over Time Compound interest is one of the simplest ideas in finance, but it can create life-changing results. It is the reason small, consistent investments can grow into large amounts over time. If you understand how compound interest works and how to use it, you can build wealth steadily without needing risky shortcuts or perfect market timing. 1. What Compound Interest Really Means Compound interest means you earn returns not only on your original money, but also on the returns you have already earned. In other words, your money starts making money, and then that new money starts making money too. Over long periods, this creates growth that can feel surprisingly fast. Simple vs. compound growth Simple interest: You earn interest only on the original amount you invested. Compound interest: You earn interest on the original amount plus all accumulated interest or investment gains. This is why time is the most powerful ingred...