Definition
Interest earned on both your original money and the interest it has already earned, so growth speeds up over time.
What it means
Compound interest means interest is added to your balance and then earns interest itself. The more often interest compounds and the longer you leave the money alone, the faster it grows. Simple interest, by contrast, is figured only on the original amount. Compounding works for you in savings and investments, and against you on debts such as credit cards, where unpaid interest is added to the balance. A quick rule of thumb, the Rule of 72, estimates how many years it takes money to double: divide 72 by the yearly rate. Investor.gov offers a free compound interest calculator from the SEC. Investment returns are not guaranteed and can be negative, so compounding at a fixed rate is only a model.
Example
$10,000 at 6% compounded yearly grows to about $17,908 in 10 years and about $32,071 in 20 years. With simple interest it would be $16,000 and $22,000.
Illustrative numbers only. Your situation will differ.