I talk a lot about the power of ‘compounding’ and I realize a lot of people don’t really know what that means. Compounding interest is often called “interest on interest.” It means that not only do you earn interest on your original money, but over time you also earn interest on the interest you’ve already gained.

A very simple way to understand this is to think about doubling:

1 + 1 = 2

2 + 2 = 4

4 + 4 = 8

8 + 8 = 16

Each time, the amount grows faster because you're adding to a bigger number. Compounding works in a similar way—your money grows faster over time because the base amount keeps increasing.

Imagine you invest $100 with an interest rate of 10% per year.

- After 1 year, you earn $10, so you have $110.

- In the second year, you don’t just earn interest on $100—you earn it on $110.

- So you earn $11, giving you $121.

Notice how the interest increased from $10 to $11. That’s compounding in action.

You don’t need to memorize it - just remember:

- Your money grows

- The growth builds on itself

- The longer you leave it, the faster it grows

In short, compounding is powerful because time and growth work together. The earlier you start, the more dramatic the results can be.