< DICTIONARY

Compound Interest

Interest that is earned on both initially contributed funds and on previously earned interest.

Over long periods of time, compound interest grows aggressively fast and can make initial contributions multiply in value.

As an example, $500 invested when a child is born and invested with 7% interest per year can multiply by 3.5 times to $1,756 after 18 years or by 87 times to $43,546 after 64 years without adding a single dollar to the investment thanks to the effects of compound interest.

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