What is compound interest and how does it benefit long-term savings?

Compound interest is the process where the interest you earn on your savings or investments is reinvested, allowing your money to grow faster over time. Unlike simple interest, which is calculated only on the original principal, compound interest accumulates on both the initial amount and the interest already earned. This creates a snowball effect, especially when investments are held long-term. The earlier you start saving, the more you benefit from compounding. For example, even small, consistent contributions to a savings account, mutual fund, or retirement plan can grow significantly over decades. Compound interest rewards patience and consistency, making it one of the most powerful tools for building wealth and achieving long-term financial goals.