Compound Interest is the Interest calculated on the initial principal and the accumulated interest from previous periods.
Savings Account Context:
“By keeping her money in a savings account that earns compound interest, Sarah’s balance grows faster since she earns interest on both her original deposit and the interest it accumulates.”

Investment Context:
“John’s investment strategy focuses on long-term growth, using compound interest to increase his returns over time significantly.”

Loan Repayment:
“With loans that charge compound interest, the amount owed can overgrow because you’re paying interest on both the original loan and the interest that builds up over time.”

Retirement Planning:
“Starting early with retirement savings allows more time for compound interest to work, resulting in exponential growth of the invested funds.”

Credit Card Debt:
“Credit card balances can multiply due to compound interest, where unpaid interest from previous months becomes part of the new balance on which interest is calculated.”