Simple vs. compound interest
Simple interest is paid only on the money you put in. Compound interest is paid on your money plus the interest it has already earned, so growth speeds up over time.
Why time matters so much
Starting early gives your money many more years to compound. That can matter more than putting in bigger amounts later. The calculator below lets you change the amount, the yearly return and the number of years.
The Rule of 72
A quick shortcut: divide 72 by the yearly growth rate to estimate how many years it takes money to double. At 6% a year, 72 ÷ 6 = 12 years.
Compounding works against you too
Unpaid credit card interest gets added to the balance and then charged interest too, so debt can grow the same way savings do. That’s one reason to pay off high-interest debt first.
A caution about real returns
The numbers here use steady example rates to show how compounding works. Real investment returns go up and down from year to year and are never guaranteed.