Compound interest

Earning a return on earlier returns as well as on the money first put in.

When returns are left invested, the next year's return is calculated on a larger amount. $1,000 at 7% becomes $1,070 after a year and $1,144.90 after two: the second year's $74.90 includes $4.90 earned on the first year's $70.

Over long periods this makes growth speed up: at an illustrative 7% a year, money roughly doubles every ten years. Compounding works the same way on debt and fees.