When the money you earn from saving starts earning its own money on top.
Example
You save $100 at 10% a year. After year one you have $110. In year two you earn 10% on the whole $110, not just the $100, so you have $121. After thirty years that $100 grows to about $1,745 without you adding anything.
How it fits in
Compounding is what makes early saving and investing count so much. The first year looks tiny, the tenth year looks fine, the thirtieth year looks unrecognisable. Two people saving the same amount at different ages can finish with very different totals because the earlier saver gives compounding more years to run. The earlier you start, the less you have to save in total.
Where this is taught
Practise it on the platform
Related terms
Interest paid only on the original amount, never on the interest you have already earned.
Needs are the things that keep you safe and well. Wants make life nicer. Mixing them up is what empties most budgets.
A plan you make in advance for what your money will do, before any of it gets spent.