Compound interest basics

A practical guide to compounding and why it matters when saving, investing, or comparing rates.

Compounding, explained simply

Compounding means you earn interest on your original amount and on previous interest. Over time, compounding can make a big difference.

Why frequency matters

Monthly vs daily compounding usually doesn’t change things dramatically at normal rates, but it can matter for comparisons — especially when products advertise rates differently.

Practical tip

If you’re comparing products, focus on the effective annual rate (if provided) and consider fees and taxes — not just the headline number.