Compound interest

Compound interest is interest earned not just on an original investment, but also on the interest that investment has already accumulated. Over time this creates a snowball effect, since each period's gains become part of the base that earns further gains.

The effect is small in the early years and becomes dramatically larger the longer money is left to grow, which is why starting to invest early, even with small amounts, has such a large impact on long-term outcomes compared to starting later with more money.