What is Compound Interest?
Earning returns on your returns — the reason starting early beats investing more later
Full Explanation
Compound interest (or compound growth) means your gains start generating gains of their own. In year one, your money earns a return. In year two, you earn a return on the original money AND on last year's gains — and every year after that, the snowball gets bigger without you adding a dollar. At the stock market's long-term average of roughly 10% per year, money doubles about every 7 years — so a dollar invested as a teenager has time to double six or seven times before retirement.
Real-World Example
$1,000 invested at 16 growing at 10%/year becomes about $2,000 at 23, $4,000 at 30, $8,000 at 37 — and roughly $100,000 by your mid-60s. The same $1,000 invested at 40 only has time to reach about $10,000. Same money, same return — the only difference is time.
Pro Tip
Compounding rewards time more than amount. Small money invested young routinely beats big money invested late — "start now with $25" is better advice than "wait until you can afford $500."
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