Compound Interest — The Most Powerful Force in Finance
Compound interest means earning interest on your interest. Over time, this creates exponential growth.
$10,000 Invested Once at 8% Annual Return
| Years | Simple Interest | Compound Interest | Difference |
|---|---|---|---|
| 5 | $14,000 | $14,693 | $693 |
| 10 | $18,000 | $21,589 | $3,589 |
| 20 | $26,000 | $46,610 | $20,610 |
| 30 | $34,000 | $100,627 | $66,627 |
| 40 | $42,000 | $217,245 | $175,245 |
In 40 years, $10,000 becomes $217,245 with compound interest vs just $42,000 with simple interest. That is 5x more!
Rule of 72
Divide 72 by your return rate to find how many years it takes to double your money:
At 6% → doubles in 12 years. At 8% → doubles in 9 years. At 10% → doubles in 7.2 years. At 12% → doubles in 6 years.
Try our compound interest calculator with your own numbers.