Compound interest appears when you do not withdraw what your money has earned. Interest, dividends or capital gains are reinvested and become part of the capital that produces the next return.
The gap against simple interest is small in year one and enormous at thirty years. At an average 7% annual return, $10,000 becomes roughly $19,700 after ten years, $38,700 after twenty and $76,100 after thirty. Nothing about the contribution changed: the only thing that changed is how long it was left alone.
This is why time horizon is the most powerful variable you have, and the only one you cannot go back and buy later. A year of delay does not cost you one year of return. It costs the most valuable year, which is the last one.
