InvestingJune 10, 20245 min read
Compound Interest: The Eighth Wonder of the World
How compound interest works and why starting early matters more than the amount.
What is compound interest?
Compound interest is interest earned on both your principal and the interest that has already accrued. Over time, this creates exponential growth.
Why time beats amount
Starting early matters more than how much you invest. $200/month at 7% for 40 years grows to more than $500/month for 20 years.
The math
The formula is A = P(1 + r/n)^(nt), where P is principal, r is rate, n is compounding frequency, and t is time in years.