How compound interest works
Compound interest means you earn interest on both your principal and on previously earned interest. The longer your money compounds, the more dramatic the effect. Starting early is far more valuable than investing a larger amount later.
FV = PV × (1+r)^n + PMT × [(1+r)^n − 1] / r
FV = future value · PV = initial · PMT = contribution · r = monthly rate
What is compound interest?
Compound interest means earning interest on your interest. Over time, this creates exponential growth — Albert Einstein reportedly called it the eighth wonder of the world.
What is the Rule of 72?
Divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 7%: 72÷7 ≈ 10.3 years.