Unlike simple interest, where you always earn interest on the same initial amount, with compound interest the interest generated is added to the capital, and from that point on it also earns interest.
The formula
```
Final capital = Initial capital × (1 + rate)^periods
```
Why time is the key factor
The effect of compound interest is small at first and accelerates dramatically over time: starting to invest 10 years earlier usually matters more for the final result than contributing more money each month. That's why "start early" is the most repeated piece of financial advice — and, even so, one of the most underrated.
Regular contributions
Combining compound interest with regular contributions (see DCA) is the basis of most long-term investment strategies.