What is the concept of compound interest?

Compound interest is the interest on a loan or deposit that is calculated not only on the initial principal amount but also on the accumulated interest from previous periods. This means that interest is earned on both the original investment and the interest that has been added to it over time. Compound interest accelerates the growth of savings and investments, making it a powerful tool for long-term wealth accumulation. The more frequently interest is compounded (annually, monthly, or daily), the faster the value of the investment or debt increases. This principle is fundamental to both personal savings and investment strategies.