what is a simple definition of compound interest 
compound interest simply means you re earning interest on both your original saved money and any interest you earn on that original amount although the term compound interest includes the word interest the concept applies beyond interest bearing bank accounts and loans including investments such as mutual funds 14who benefits from compound interest compound interest benefits investors across the spectrum banks benefit from compound interest lending money and reinvesting interest received into additional loans depositors benefit from compound interest receiving interest on their bank accounts bonds or other investments the bottom linethe long term effect of compound interest on savings and investments is indeed powerful because it grows your money much faster than simple interest compound interest is a central factor in increasing wealth it also mitigates a rising cost of living caused by inflation for young people compound interest offers a chance to take advantage of the time value of money remember when choosing your investments that the number of compounding periods is just as important as the interest rate 