Plain-English definitions, reviewed by an independent investor
Compound Interest
Compound interest is earning returns on your prior returns, not just your original money — the engine behind long-ter…
Compound interest is earning returns on your prior returns, not just your original money — the engine behind long-term growth.
A = P × (1 + r)^n (A = final, P = principal, r = rate, n = periods)
Why it matters
It is why starting early beats investing more later; time is the multiplier.
Common confusion
Compounding works both ways — it also deepens losses and debt if working against you.
Frequently Asked Questions
What is the rule of 72?
Divide 72 by the annual rate to estimate years to double your money.
Why start investing early?
More time means more compounding cycles, even with smaller amounts.