What is compound interest?

Compound interest is interest earned on both your original deposit and on previously earned interest. It causes your money to grow exponentially over time — the longer you invest, the faster it grows.

How much does compound interest earn on $10,000?

At 7% annual return: $10,000 becomes $19,672 in 10 years, $38,697 in 20 years, and $76,123 in 30 years. That's the power of compounding — your money roughly doubles every 10 years at 7%.

What is the Rule of 72?

Divide 72 by your interest rate to estimate how many years it takes to double your money. At 7%: 72/7 = 10.3 years. At 10%: 72/10 = 7.2 years. It's a quick mental math shortcut for compound growth.

Compound Interest Explained: How Your Money Grows Over Time

Compound interest is interest on interest. It's why $10,000 invested at 7% becomes $76,123 in 30 years instead of $31,000 with simple interest. The difference? $45,000 of free money.

How Compound Interest Works

Simple interest earns money only on your original deposit. Compound interest earns money on your deposit plus accumulated interest. Each period, the base grows — and so does the payout.

The formula: FV = P × (1 + r/n)^(n×t)

Where P = principal, r = annual rate, n = compound frequency, t = years.

The Numbers: $10K at 7% Over Time

Years	Balance	Interest Earned
5	$14,026	$4,026
10	$19,672	$9,672
20	$38,697	$28,697
30	$76,123	$66,123

Add $500/month and that $10K becomes $610,000 in 30 years. Starting early matters more than starting big.

The Rule of 72

Divide 72 by your rate to estimate doubling time. At 7%: 72÷7 = 10.3 years to double. At 10%: 7.2 years. Quick, no calculator needed.

See Your Money Grow

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