How Compound Interest Builds Wealth

Compound interest is interest earned on your interest. Instead of growing in a straight line, money that compounds grows on an accelerating curve — each period's gains become part of the base that earns the next period's gains. Over decades, that curve does most of the heavy lifting.

Why time beats amount

Because compounding accelerates, the earliest dollars you invest are worth far more than later ones — they have the most time to multiply. Someone who invests modestly in their twenties often ends up ahead of someone who invests much more starting in their forties. The lesson isn't “invest more,” it's “start sooner.”

The Rule of 72

A handy shortcut: divide 72 by your annual return to estimate the years it takes to double your money. At 8%, that's about 9 years; at 6%, about 12. It's an approximation, but a surprisingly good one for typical rates.

What drives the final number

• Rate of return — even a couple of percentage points compounds into a large gap over decades.
• Time horizon — the single biggest lever, because of how compounding accelerates.
• Regular contributions — steady monthly investing smooths out timing and adds its own compounding stream.

Project your own growth — from a lump sum, monthly contributions, or both — with the calculators below.