Compound growth

Compound growth is what happens when the returns on something are added back and then earn returns of their own. With simple growth you gain the same amount every period, because it is always calculated on the starting amount. With compounding, each period's gain joins the balance, so the next period grows a slightly larger sum — and that snowballs. Because the balance grows by a percentage of itself each period, it grows exponentially: small differences early become dramatic over long horizons. Three levers drive it — the rate, the length of time, and how often it compounds — and time is the most powerful, which is why starting early matters so much. It is the engine behind savings and investment returns, and, in reverse, behind debt.