What is the Rule of 72?

The Rule of 72 is a quick mental math shortcut to estimate how long it takes to double your money. Divide 72 by your annual interest rate. For example, at 8% interest, your money doubles in 9 years (72 / 8 = 9).

Simple vs. Compound Interest: What's the difference?

Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal PLUS the interest you've already earned. Compound interest grows much, much faster over time.

When should I start investing?

Yesterday. Time is the most important factor in compound interest. Investing $100 a month starting at age 20 yields infinitely more at age 60 than starting at age 40, even if the later amounts are higher.

Compound Interest: Your Money Making Money

Albert Einstein reportedly called compound interest the "eighth wonder of the world." He who understands it, earns it; he who doesn't, pays it.

Watch Your Money Grow

Visualize the snowball effect of compounding with our calculator.

Compound Interest Calculator

How It Works

Let's say you invest $1,000 at 10% interest.

Year 1: You earn $100. Balance: $1,100.
Year 2: You earn 10% on $1,100 (not just the original $1,000). You earn $110. Balance: $1,210.
Year 10: You earn $235. Balance: $2,593.

It starts slow, but over 30 or 40 years, the growth becomes exponential. That curve is where wealth is built.

The Three Pillars of Compounding

Principal: The money you start with and add.
Rate of Return: The interest rate you earn (e.g., 7-10% from the stock market).
Time: The most powerful variable. Even a small amount invested for 50 years outperforms a large amount invested for 10 years.

The Dark Side: Compounding Debt

Compound interest cuts both ways. Credit card debt compounds against you. If you owe $5,000 at 20% interest and only make minimum payments, you will pay thousands in interest over decades. Use our Credit Card Payoff Calculator to stop the bleeding.

Start Early, Start Small

You don't need to be rich to invest. You just need to be consistent. Calculating your percentage returns shows that avoiding losses is just as important as chasing gains.