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Simple Interest
Interest paid only on the original amount, never on the interest you have already earned.
Example
You save $100 at 10% simple interest. Each year you get $10. After thirty years you have $400. Compare that with $1,745 from compound interest at the same rate. Same starting money, same percentage, very different finishing pile.
How it fits in
Simple interest grows in a straight line. Compound interest grows on a curve. The difference is small in year one and very large over decades. Some bank products and short-term loans use simple interest. Most savings and most credit-card debt use compound interest, which is why credit-card balances grow so fast if you don't pay them off.
Where this is taught
Related terms
When the money you earn from saving starts earning its own money on top.
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.