Albert Einstein allegedly called compound interest the eighth wonder of the world. Whether he said it or not, the math justifies the reverence — and understanding it changes how you think about every financial decision you make.
The simplest explanation
Simple interest: earn interest on your principal only. Compound interest: earn interest on your principal AND on the interest you've already earned. Over long periods, the difference is staggering.
The power in numbers
📈 Compound growth calculator
The Rule of 72
Divide 72 by your annual return to estimate how long to double your money. At 7%: 72 ÷ 7 = ~10.3 years to double. At 10%: 7.2 years. At 6%: 12 years. This rule also applies to debt: credit card at 22% APR doubles your balance in 72 ÷ 22 = 3.3 years if you make no payments.
Compound interest working against you
Credit card at 22% APR on $5,000 balance, paying only minimums: takes 17 years to pay off and costs $8,900 in interest — nearly double the original balance. This is compound interest applied to your debt. Understanding this makes minimum payments obviously unacceptable.
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