Compound Interest
Also known as: Zinseszins, compound growth, compounding
Compound interest means you earn interest on your interest. Your money doesn't grow linearly but exponentially — like a snowball rolling downhill, getting bigger and bigger.
How does it work?
Example: You invest €10,000 at 7% annual return. After year 1 you have €10,700. After year 2 you get 7% on €10,700 = €11,449. The €700 interest from year 1 is now earning interest itself. After 30 years, €10,000 becomes over €76,000 — without adding a single cent.
Why is time the most important factor?
Compound interest needs time to unfold its power. In the first years, not much happens — after 20–30 years the curve explodes. That's why: the earlier you start, the more powerful the effect. €200/month from age 25 beats €400/month from age 35.
BudgetHeld says
With the BudgetHeld compound interest calculator, you can see exactly what your savings plan becomes over the years. And in the budget tool, you plan the monthly amount under 'Investing' — so your wealth grows systematically.
Related tools
Compound Interest Calculator →Related Terms
Written by David El Dib — Financial expert & founder of MoneyTalk