Glossary

Interest paid on interest. You earn compound interest if you have savings and don't spend the money you earn from interest. For example, if you save $100 at 3%, you'll earn $3 in the first year. You now have $103. In the next year, you earn 3% interest on your $103. The 3% you earn on the $3 you earned as interest last year is compound interest. Over the long term, compound interest makes your money grow much faster than the straight interest rate.