You invest $1,000.00.
At the end of year one your $1,000 has earned 10% = $100.00.
The total value is now $1,100.00.

At the end of year two, your $1,100.00 has earned 10% = $110.00.
The total value is now $1,210.00.

Notice that you earned $10 on the $100 interest from the previous year. The next year you will earn interest on the $110. Sounds minor - and it is over the short term but over the long term it really magnifies.  In 30 years a $1,000.00 investment will grow to over $15,000.00!

Year     10%
1       $ 1,000.00
2       $ 1,100.00
3       $ 1,210.00
4       $ 1,331.00
5       $ 1,464.10
6       $ 1,610.51
7       $ 1,771.56
8       $ 1,948.72
9       $ 2,143.59
10     $ 2,357.95
11     $ 2,593.74
12     $ 2,853.12
13     $ 3,138.43
14     $ 3,452.27
15     $ 3,797.50
16     $ 4,177.25
17     $ 4,594.97
18     $ 5,054.47
19     $ 5,559.92
20     $ 6,115.91
21     $ 6,727.50
22     $ 7,400.25
23     $ 8,140.27
24     $ 8,954.30
25     $ 9,849.73
26     $10,834.71
27     $11,918.18
28     $13,109.99
29     $14,420.99
30     $15,863.09