Compounding interest, compounding interest, compounding interest. Say it out loud (or in your head one more time) so you remember it. It is the most essential term to understand in order to take control of your financials. Compounding interest is what puts some people in financial misery and makes other financially independent. Get an understanding of compounding interest early in your life, and be in control!
Compounding interest is in short interest on interest.
An example of this is that the first year $1 is invested with an 10% interest it will yield 10 cents, so that you have $1.10. The second year this investment however has 10 cents more to earn interest than in the first year. The investment will as such yield 11 cents instead of 10 cents in year two, so that you have $1.21 after the second year.