The Magic of Compound Interest

"Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." This quote, often attributed to Einstein, highlights a powerful truth: time is money's best friend.

Simple vs. Compound Interest

Simple Interest is calculated only on the principal amount of a loan or deposit.

Compound Interest is calculated on the principal amount AND the accumulated interest of previous periods. It's "interest on interest."

The Snowball Effect

Imagine investing $10,000 at a 5% annual return.

• Year 1: You earn $500. Total: $10,500.
• Year 2: You earn 5% on $10,500 (not just the original $10k). That's $525. Total: $11,025.
• Year 10: Your total is roughly $16,288.
• Year 30: Your total is roughly $43,219.

Without adding a single extra penny, your money has quadrupled just by sitting there.

The Rule of 72

Want a quick way to estimate how long it takes to double your money? Divide 72 by your interest rate.

At 8% return: 72 ÷ 8 = 9 years to double your investment.

Start Early

The biggest factor in compound interest is time. Starting 10 years earlier can mean hundreds of thousands of dollars more in retirement, even if you invest less money overall.

Plan Your Future

See the magic for yourself with our Compound Interest Calculator.