Simple vs Compound Interest
Simple interest adds the same amount; compound interest earns on interest too.
The idea
Interest is extra money a bank may add for keeping your savings there. With simple interest, the amount added is always figured on the money you started with, so it is the same every year. With compound interest, the interest you already earned starts earning interest too, so the total can build faster the longer it sits. Rates can change and no account is promised to keep growing, but compounding is a big reason people talk about starting early. 📈
Words to know
- interest
- Extra money a bank may add for keeping your savings there.
- principal
- The money you started with before any interest.
- interest rate
- How much interest is added, written as a percent.
- simple interest
- Interest figured only on the money you started with.
- compound interest
- Interest figured on your money plus the interest you already earned.
Try it — no account needed
Match each word to what it means.
0 / 4 matched
In the full lesson
- 1Match the pairs
- 2Put it in order
- 3Make the call
Vine has 107 lessons like this one, each written three ways so a 7-year-old and a 17-year-old both get a version that fits.
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