NOTE to parents, teachers, and educators of every kind: Use this definition as a simple, kid-friendly teaching tool. Click this link to view the full index of current money terms and definitions, and learn how to use the Sammy Rabbit dictionary to support teaching and learning.
Word and Category
Word: Compound Interest
Related Definition: Interest
Category: Growth Word
What this category means: Growth words explain how money can increase over time. These words help children understand that patience and good habits can make money grow faster.
Definitions
In Simple Words
Compound interest is when your money grows—and then the growth grows too.
It’s earning interest on your interest.
A Little More Grown-Up
Compound interest happens when interest is added to your money and then future interest is earned on the new total. Over time, this can make savings and investments grow much faster.
Context Clues
Note: You can find the phrase “compound interest” in Sammy Rabbit lessons and activities, where kids learn how saving and investing early and often—combined with waiting—can lead to big results.
Sammy Says Sentences
Sammy Says: “Compound interest is magic math. Save and invest early and often to earn compound interest. Stay on the path! These are great money habits!”
Silly Sentence
My money made money, then threw a party and made even more money!
Serious Sentence
Compound interest helps your savings grow faster over time.
Rhyming Sentences
Silly Rhyming Sentence:
My money grew, then grew again—Compound interest for the win!
Serious Rhyming Sentence:
When savings grow and growth earns too, compound interest works for you.
Money Habit Sentences and Connection
Money Habit Sentences
Saving money so it can earn compound interest is a smart habit that helps your money grow faster. Making saving a daily habit lets compound interest do more and more work for you over time.
Share with kids:
Understanding compound interest encourages children to start saving and investing early, stay consistent, and be patient. It shows how small habits can lead to big outcomes.
Examples of Compound Interest
Saving and investing money over a long time
Leaving principal and interest in your account to compound and grow
Adding deposits to principal and interest and waiting to see compound growth
Examples of What Is Not Compound Interest
Spending money so it is not able to earn interest, compound and grow
Taking money out of saving and investment accounts right away or when you do not have to so it is unable to earn interest, compound and grow
Related Money Words
Interest • Save • Time • Grow • Patience
Opposite Money Words, Phrases, Concepts
Spend • Not earn compound interst • Pay compound interest (on money borrowed)
Questions for Kids
Ask your child or student: “Why do you think starting early helps compound interest work better?” "What do you think happens to money when it stays saved for a long time?"
"How does waiting help money grow?"
Remember
Compound interest rewards saving early, saving often, keeping money saved and invested, and waiting patiently.
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Related Standards Aligned Lesson Plans
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