What Is Compound Interest

Compound interest is interest accumulated from a principal sum and previously accumulated interest, resulting from reinvesting or retaining interest that would otherwise be paid out. It differs from simple interest, where previously accumulated interest is not added to the principal amount of the current period. Compound interest is a crucial concept in personal finance, investing, and economics, as seen in platforms like [[robinhood|Robinhood]] and [[fidelity-investments|Fidelity Investments]]. For instance, understanding compound interest is essential for making informed decisions about [[certificates-of-deposit|certificates of deposit]] and [[high-yield-savings-accounts|high-yield savings accounts]], and is often discussed by experts like [[dave-ramsey|Dave Ramsey]] and [[suze-orman|Suze Orman]].