Investing is one of the most powerful ways to build wealth over the long term. At its heart sits a simple idea: your money can make more money over time, through a concept known as compounding. The earlier you understand it, the more it can work in your favour. Here is the idea in one example. Suppose you invest S$100,000 today and it grows at a steady 7% a year. Twenty years later, it would have more than tripled to roughly S$386,968 — without you adding another cent. By contrast, if you withdrew the gains each year instead of leaving them to grow, you would collect about S$7,000 a year, or S$140,000 over the same period. The difference — close to S$247,000 — is compounding at work.

What is compound interest (and how it differs from simple interest)

Compound interest is interest earned on top of interest you have...