Financecalendar_todayLast updated: Apr 2026
What is Compound Interest?
/ˈkɒmpaʊnd ˈɪntrɪst/
Interest calculated on both the initial principal and the accumulated interest from previous periods, creating exponential growth over time.
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Everyday Example
If you invest £1,000 at 10% annual interest, after year 1 you have £1,100. In year 2, you earn 10% on £1,100 — not £1,000. This snowball effect, repeated over decades, is how ordinary savers become wealthy.
publicReal-World Application
“Warren Buffett accumulated 99% of his wealth after the age of 50 — a direct result of compound interest working over 60+ years of investing.”
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Did you know?
Albert Einstein reportedly called compound interest the "eighth wonder of the world". The concept dates to ancient Babylon, used in commercial loan calculations over 4,000 years ago.
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Key Insight
Time is the most powerful ingredient in compound interest. Starting to invest just 10 years earlier can double your final wealth.
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