As a concrete example, a person opened a new bank account and “contributed” 1000$ in the account, the bank gave him a 150$ bonus and by the end of 31 Dec, the account earned and interest of 35$, the “earnings” will be 185$ (150 + 35). Tax-deferred growth - An account where earnings are not taxed till a withdrawal is made from the account (what if 10% money is withdrawn from the account? well, that is account specific and will be covered in a different blog post) Tax-free growth - An account where earnings are not taxed ever - usually these accounts have certain constraints like age at the time of withdrawal should be more than 59.5 or money should be held in the account for a certain period of time or both.