Compound interest.
A definition, in plain English — with the books that teach it.
What it means
Interest earned on both the original principal and on previously accumulated interest. The mechanism by which $1 invested today becomes more than $1 + a fixed return — because each year's growth gets applied to a bigger base than the year before.
Example
Albert Einstein supposedly called compound interest 'the eighth wonder of the world.' (The attribution is dubious, but the math isn't.) $10,000 invested at 8% annually compounds to $46,610 after 20 years — the 'extra' $36,610 above the original $10,000 isn't just the 8% × 20 years (that'd be $26,000). It's the interest earned on the interest, on the interest, on the interest. Compounding is exponential, not linear, and the gap between linear and exponential growth is the entire reason long-term investing works.
