What is compound interest?

Imagine you put money in a savings account. The bank pays you interest, which is like a small extra amount added to your original money.

With simple interest, you only earn interest on the original amount you put in.

But with compound interest, you earn interest not only on your original money but also on any interest that has already been added to your account. So, your balance grows faster over time because you're earning interest on a bigger and bigger amount. It's like a snowball rolling downhill – it gathers more snow and gets bigger as it goes!