Compound interest is one of the most powerful concepts in investing. It allows you to earn interest not only on your initial investment but also on the interest that has already accumulated. This creates a snowball effect, where your wealth grows at an accelerating rate over time.

The key to harnessing the power of compound interest is to start investing early. The longer your money is invested, the more time it has to compound. Even small, consistent investments can grow significantly over the years.

To illustrate, imagine you invest $1,000 at an annual interest rate of 8%. After one year, you’ll earn $80 in interest. The following year, you’ll earn interest on $1,080, and so on. Over time, this can lead to exponential growth.

Patience is crucial when it comes to compound interest. The real power comes from allowing your investment to grow over decades, making it one of the most effective ways to build wealth for long-term goals like retirement.