See the power of compound interest and watch your money grow
Compound interest is interest earned on both your original investment and the interest that investment has already earned. Over time, this creates a snowball effect where your money grows faster and faster. Einstein called it the "eighth wonder of the world."
The S&P 500 has averaged about 10% annually over the long term (before inflation). A conservative estimate of 7% (after inflation) is often used for retirement planning. Your actual returns will vary based on your investment mix and market conditions.
Compound interest needs time to work its magic. Money invested in your 20s has more decades to compound than money invested in your 30s or 40s. The difference can be hundreds of thousands of dollars at retirement.
Simple interest is calculated only on the original amount. Compound interest is calculated on the original amount plus any interest that has already been added. Over long periods, compounding makes a massive difference in your final returns.