Glossary

Compound interest

Earning interest on your interest, so savings grow faster over time. It works against you on debt too.

Example: $1,000 at 5% a year becomes $1,050 after one year and about $1,628.89 after ten years, because each year's interest also earns interest. Starting early gives compounding more years to work. On card debt the same effect makes a balance grow fast.

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