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Compound interest happens when you earn interest off of the interest you’ve already earned. So in financial terms, if you invest $100 and make 10% on it each year, you’d have $110.
The compounding part comes in when the interest is calculated based on that new total. Instead of making 10% on $100 the next year, you’d make 10% on $110. So instead of earning $10, you’d earn $11. This continues – so next year, you’d make 10% on $121.
In my example, waking up earlier paid me interest in the amount of time it earned me to meditate and journal. Those activities compounded the interest because they also improved my life by giving me more focus and willpower to do better work and to be healthy.
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via How Every Small Change You Make Pays Compound Interest | Blonde on a Budget.
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