If two accounts start with the same amount of money and have the same interest rate, compound interest will give you more money over time. With compound interest, you earn interest not just on your original amount but also on the interest you earned in earlier years. On the other hand, simple interest only pays you interest on your starting amount. After one year, the interest from compound interest will be higher than the interest from simple interest because the interest is added back into the account to earn even more interest.
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If both accounts have the same initial amount and interest rate, compound interest will yield more over time. Compounded interest is calculated on the initial principal and the accumulated interest from previous periods. In contrast, simple interest is calculated only on the principal. After one year, interest earned with compound interest will be more than with simple interest due to earned interest being reinvested.
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