What is Compound Interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. In simple terms: you earn interest on your interest. This creates exponential growth over time — which is why starting early matters so much.
Q: What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual return rate. For example, at 7% annual return, your money doubles roughly every 72 ÷ 7 = 10.3 years.
Q: How often should interest compound for maximum growth?
More frequent compounding means faster growth. Daily compounding yields slightly more than monthly, which yields more than annually. However, the difference is small compared to the interest rate and time horizon.