Compound Interest
Interest calculated on both your original money and the interest it has already earned. It is the mechanism that turns steady, boring contributions into large sums over decades.
By Findley's Finance · Last reviewed: September 2026
Why it matters
Simple interest pays you only on principal; compound interest pays you on principal plus accumulated gains, so growth accelerates the longer money sits. The practical consequence: starting ten years earlier matters more than picking the perfect investment. Time in the market beats timing the market because compounding needs time more than it needs brilliance.
Concrete example
$500/month at a 7% average annual return becomes roughly $260,000 after 20 years — of which you only contributed $120,000. The rest is compounding.