How Compound Interest Works

Here's the short version: compound interest means your interest earns interest. You put in $10,000 at 5% — after year one you've got $10,500. But in year two, you earn 5% on $10,500, not just the original $10,000. Over decades, this snowball effect gets seriously powerful.

Simple interest, on the other hand, only ever pays you on your original principal. The longer your time horizon, the bigger the gap between simple and compound returns.

The Rule of 72

Want a quick way to estimate when your money doubles? Divide 72 by your annual interest rate. At 8%, that's roughly 72 / 8 = 9 years. It's not perfectly precise, but it's a handy mental shortcut that works best for rates between 6% and 12%.

Why Starting Early Matters More Than Starting Big

A lot of people think they need a huge lump sum to make investing worthwhile. Play with this calculator and you'll see that's not true. Even modest monthly contributions, given enough time, can grow into something substantial. The real secret isn't how much you start with — it's how early you start and how long you keep going.