compound interest

noun

UK /ˌkɒm.paʊnd ˈɪn.tər.est/

US /ˌkɑːm.paʊnd ˈɪn.tɚ.est/

Compound interest is when your money earns extra money, and then that extra money also earns money too.

If you save $100 with compound interest, you will have more than $100 later because your interest earns interest too.

SYNONYMS

accumulated interest interest on interest compounded return growth interest

RELATED WORDS

savings interest rate investment principal bank account

OTHER MEANINGS

2. Interest calculated on both the initial principal and the accumulated interest from previous periods.

The loan grew quickly because of compound interest.

3. A financial concept where earnings generate further earnings over time.

Understanding compound interest helps people plan for retirement.

4. The process of reinvesting interest so that it becomes part of the principal.

Her savings account uses compound interest to increase her balance each month.