That’s why the effects of compound interest only get more impressive over time, especially over longer periods, and with higher-interest accounts, like Certificates of Deposit. So, for every hundred dollars you deposit at one percent, you'll earn that interest on one hundred and one dollars after the first year, and so on, and so on.

If you have a one percent APY, for instance, then you earn one dollar on every hundred dollars you keep in that account, each year.Ĭompound interest is the interest you earn on the interest you earn on your money. You can see how much interest you’re earn by looking at your account's APY, or annual percentage yield. Interest is the money that a bank pays you on your deposit. When you save money, you probably think of it as adding up with each deposit, a little bit at a time.īut sometimes, one plus one can equal more than two - thanks to a powerful force called Compound Interest-Here's how it works. But sometimes, one plus one can equal more than two-thanks to a powerful force called compound interest. When you save money, you probably think of it as adding up with each deposit, a little bit at a time.