Compound interest, in simple terms, means the interest calculated on the initial principal and also on the accumulated interest of previous periods. This means that interest earns interest over time, allowing the investment or loan to grow faster. Compound interest is beneficial for savings and investments, as it can help grow wealth. However, for loans, it goes the other way and increases the amount a borrower has to repay. The frequency of compounding (daily, monthly, or yearly) can also impact how quickly the amount grows.