Glossary

Compounding (compound interest)

Earning returns on earlier returns as well as on the original amount, so growth speeds up over time.

Compound and simple growth 1,000 growing at 5% a year for 30 years: about 4,322 with compound interest, 2,500 with simple interest. Year 0 10 20 30 1,000 Compound 4,322 Simple 2,500

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