Compound interest is when the interest you earn gets added to your balance, and then you earn interest on that new balance too. This creates a snowball effect where your money grows faster over time. The more often interest compounds, the faster your money grows.
You deposit $1,000 earning 10% interest per year that compounds annually. After year one, you have $1,100. In year two, you earn 10% on $1,100, which gives you $1,210. Your money grows because you're earning interest on both your original $1,000 and the $100 in interest you already earned.
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