Compound interest
Interest earned on both your original money and the interest it has already earned.
Also known as: compounding
Updated June 2026
Compound interest is interest calculated on your initial principal and on the accumulated interest from previous periods. It is the single most important force in long-term investing — money grows on money.
Why it matters
The longer your time horizon, the more dramatic the effect. €1,000 at 7% a year becomes about €1,967 after 10 years, but roughly €7,612 after 30 — most of that gain is interest earning interest.
The lever you control
Three inputs drive the outcome: the rate, the amount you contribute, and time. Time is the most powerful and the only one you can’t buy back, which is why starting early beats starting big.
Related: APR vs APY explains how compounding frequency changes the headline rate.