The Magic of Compound Interest: Why Starting Early Matters

Albert Einstein allegedly called compound interest "the eighth wonder of the world." Whether he said it or not, the sentiment is absolutely true—compound interest is the most powerful force in wealth building.

What is Compound Interest?

Compound interest is earning interest on your interest. Instead of just earning returns on your original investment, you earn returns on your original investment PLUS all the returns you've earned in previous years.

The Time Advantage

Let's look at two investors:

Sarah starts at 25:

• Invests $200/month for 10 years
• Total invested: $24,000
• At 7% annual return, she has $688,000 at age 65

Mike starts at 35:

• Invests $200/month for 30 years
• Total invested: $72,000
• At 7% annual return, he has $609,000 at age 65

Sarah invested $48,000 LESS but ended up with $79,000 MORE! That's the power of starting early.

How to Harness Compound Interest

1. Start now - Even $25/month is better than waiting
2. Invest consistently - Set up automatic investments
3. Choose growth investments - Index funds are a great start
4. Don't touch it - Let compound interest work its magic
5. Increase contributions - Add more when you get raises

Use Our Calculator

Try our compound interest calculator to see how your money could grow over time. Play with different amounts and timeframes—you might be surprised by the results!

The best time to start investing was 20 years ago. The second best time is today.