compound interest

Compound Interest Explained: How Your Money Grows Over Time

Compound Interest Explained: How Your Money Grows Over Time When I was 22, my first boss told me to open a Roth IRA and put in $200/month. I thought he was crazy — I was barely making rent. But I trusted him and did it anyway. Those $200 monthly contributions from ages 22-35 (just $31,200 total) are now worth over $180,000 at age 42. The money I contributed after 35? It's barely caught up. That's compound interest: the earlier dollars do almost all the heavy lifting. Compound interest is interest earned on both your initial investment and the accumulated interest from previous periods—it's essentially "interest on interest." This creates exponential growth that can transform modest regular investments into substantial wealth over time. Use our Compound Interest Calculator(/finance/compound-interest-calculator) to see exactly how your money can grow. What Is Compound Interest? Compound interest differs from simple interest, which is calculated only on...