What is compound interest?
Compound interest means you earn returns on your past returns, not just on what you put in. Over long periods this snowballs: in many scenarios the interest earned ends up larger than everything you contributed.
Frequently asked questions
What return should I assume?
High-yield savings accounts pay a few percent; broad stock market indexes have historically averaged around 7% per year after inflation, with large ups and downs along the way.
Does compounding frequency matter much?
A little. Monthly vs. annual compounding changes the result only slightly. Time and contribution size matter far more.
Estimates for illustration only, not financial advice. Investment returns are not guaranteed.