Compound Interest — How Your Money Doubles Over Time

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Overview

Compound interest is where interest earns interest. It is the single most powerful concept in personal finance — often called the eighth wonder of the world.

The Formula

A = P × (1 + r)ⁿ where P=principal, r=annual rate, n=years

Standard formula used by professionals worldwide

Worked Example

Step-by-step

100,000 at 10% for 20 years → 672,750. Simple interest would give only 300,000

Key Concepts

Accuracy: Results are as accurate as the inputs you provide
Units: Always use consistent units throughout your calculation
Verification: Double-check important calculations before making decisions
Professional advice: For major financial, health, or structural decisions, consult a qualified professional

Privacy and Security

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Frequently Asked Questions

What is the Rule of 72?

Divide 72 by your rate to find years to double. At 8%: 72÷8 = 9 years.

Monthly vs annual compounding?

Monthly compounding gives slightly more than annual. The more frequent, the higher the final amount.

How do I use this for retirement?

Start early. 1,000 at age 25 at 8% = 21,724 by age 65. At age 35 it is only 10,063.

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