Learn about the 8th wonder of the world - compound interest
Compound interest is often called the "eighth wonder of the world" because it has the power to turn small, regular investments into substantial wealth over time.
Compound interest means you earn interest on both your original money AND on the interest you've already earned.
Example: If you have $100 earning 10% interest, you get $10 interest in year one. In year two, you earn 10% on $110, so you get $11 interest, and so on.
In the calculator, turn on "Compare with simple interest" to see the dramatic difference. Over 30 years, compound interest can generate 2-3 times more wealth than simple interest with the same rate.
The Rule of 72 is a simple mental math trick to estimate how long it will take your money to double at a given interest rate.
Formula: Years to double = 72 ÷ Interest Rate
This rule shows why small differences in returns make huge differences over time. Just 2% more return can cut years off your doubling time.
The longer your money compounds, the more dramatic the growth. This is why starting early is so powerful.
Higher returns accelerate compounding. Even small differences in rates create huge differences over decades.
Regular contributions provide more principal for compounding to work on, creating a snowball effect.
Time is the most powerful element because compounding works exponentially. In the early years, growth seems slow. But in later years, your money starts growing so fast that it can exceed your total contributions.
The early bird contributed 67% LESS money but ended with 29% MORE at retirement!
Just 2% more return nearly doubles your money over 30 years. Another 2% nearly doubles it again!
"Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it."
- Albert Einstein