Question by angel_rat_83: What is compounding and why is it so important in decisions such as comparing investments, loans, debt payoff?
What is compounding and why is it so important in decisions such as comparing investments, loans, debt payoff order.

Best answer:

Answer by Terry
Compounding means you don’t take money out of a fund; you leave the interest in there to earn more interest.

For example, if I have $ 100 and I earn 10% in the first year, I have $ 110. If I don’t add any more money, but leave that interest in the account, the next year at 10% I earn $ 11. This is the power of compounding.