Compound interest is the concept of earning interest on your interest, leading to exponential growth in your investments over time. This means that the interest you earn in the first year gets added to the principal amount, and you then earn interest on the new total in the second year, and so on. For example, if you invest $1,000 at an annual interest rate of 5%, after one year, you would have $1,050. In the second year, you would earn 5% interest on $1,050, resulting in $1,102.50. Over time, this compounding effect can significantly boost your wealth. The key to maximizing the power of compound interest is to start investing early, allowing more time for your investments to grow. Even small, regular contributions to your investments can have a substantial impact over the long term. By harnessing the power of compound interest, you can build wealth steadily and achieve your financial goals more easily.