Compound interest is the interest added to the original amount invested, and then you earn interest on the new amount, which grows larger with each interest payment. For example, if you invest $100 and earn 1% annually compounding daily, you'd earn .00274% daily (1% ÷ 365) in interest. On day one, you'd have $100.0000274, and on the next day, you'd earn another .00274%, and by the end of one year (365 days), you'd have $101.01.