Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. This means that interest is earned on top of interest, allowing your money to grow exponentially over time. The key to maximizing the power of compound interest is to start investing early and consistently. By reinvesting your earnings, you can take advantage of the compounding effect, allowing your investments to grow significantly over the long term. For example, if you invest $1,000 at an annual interest rate of 5%, after one year, you will have $1,050. In the second year, you will earn interest not only on the initial $1,000 but also on the $50 interest earned in the first year. This snowball effect continues to grow your investment over time. The longer you let your money compound, the faster it will grow. By understanding the power of compound interest and starting early, you can make your money work harder and achieve your financial goals sooner.