9 Financial Planning Terms You Should Know by the Time You’re 40

Compound interest

According to the head of investments at Wealthsimple, Dave Nugent, compound interest is an important factor to understand since it capitalizes on the long lead, as opposed to short-term wins. As he explains, “Compound interest is the principle by which the interest you earn also earns interest, and the interest on that interest earns interest, and so on forever. The larger your balance gets, the bigger those interest numbers become.” On the other hand, you’ll want to avoid compound interest when it comes to your credit card. Nugent suggests paying down any debt before beginning investing, so you’re not canceling out your effort.

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