What is Compound Interest?

Video Transcript

"The question can be asked how do you figure compound interest. Which would you rather have, a million dollars or a penny given to you every day that doubles for thirty days. The answer is the penny given to you every day that doubles. Because interest compounding on interest gets exponential rates of return that grow even higher. Compound interest is the type of interest that is paid usually to higher interest rates environments, people with lower credit scores, simple interest is a more effective way to go. Basically interest is a vehicle that is paid from the borrower to the creditor for the privilege of using their money. But compound interest is always a compounding vehicle and if you are an investor that is the best interest to achieve because the interest especially if it's tax deferred will compound upon the interest that you have earned, getting even larger in an investment going forward. This is Patrick Munro talking about the benefits of compound interest."