Compound interest
GeneralInterest calculated on both the original amount and the interest already earned. Over time, compounding causes savings to grow faster and debts to grow larger. Starting early makes a significant difference because of this effect.
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Interest rate
The percentage a lender charges you to borrow money, or the percentage a bank pays you for keeping money in a savings account. Lower rates are better for borrowing; higher rates are better for saving.
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Principal
The original amount of money borrowed or invested, not including interest or earnings. On a loan, your payments go toward both principal and interest; paying down principal faster saves money over time.
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Yield
The income earned on an investment, expressed as a percentage of its value. Yield includes interest and dividends. A higher yield means more income, but often comes with more risk.