Explain How Compound Interest Works Using a Real-Money Example

Compound interest is described as the eighth wonder of the world by people who already understand it, which is unhelpful to everyone else. This explains it from scratch using real numbers, shows what the actual growth looks like over five years, and makes clear why waiting ten years to start matters more than most people realise.

Explain compound interest to me as if I have never encountered the concept before. Use a worked example starting with {INITIAL_AMOUNT} saved at [5%] annual interest, compounded [annually].

Cover:
1. What the difference is between simple and compound interest
2. How the example grows year by year for [five] years, showing the actual numbers
3. Why starting earlier matters: show what happens if the same amount is invested [ten] years later
4. One common mistake people make because they underestimate compound interest

No jargon. No equations unless they help, and if you use one, explain each part.