Compounding is the process of when interest is credited to an existing principal amount as well as to interest already paid.  Compounding can be understood as interest on interest (the effect of magnifying returns to interest over time). For example, when banks or financial institutions credit compound interest, they will use a compounding period such as annual, monthly, or daily calculated as such:
 

A=P(1+r divided by n) nt

A is the final amount.

P is the initial principle balance.

r is the interest rate.

n is the number of times the interest is applied for a time period.
t is the number of time periods that have elapsed.

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Compounding is a good way to increase your money.  This is why we hear about the benefits of saving money.  When you save money in your bank account, it accumulates interest and your money will increase based on your interest rate.  Compounding is also referred to as the Time Value of Money (TMV) is the increasing value of an asset due to the interest earned on both a principal and accumulated interest.  Compound interest works on both assets and liabilities. For example, compounding boosts the value of an asset more rapidly, it can also increase the amount of money owed on a loan, as interest accumulates on the unpaid principal and previous interest charges.

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If you are interested in increasing your money, it is important that you learn more about Compounding.  I included a YouTube video below of one of the wealthiest men in the world, Warren Buffet, who explains the benefits of Compounding.

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Watch Warren Buffet's video on Compounding Interest.

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By Jason Torrents