DayCents

Compound Interest

Compound interest is interest calculated on both your original principal and the interest already earned. Because each period's earnings are added to the balance, the next period earns interest on a larger amount — so growth accelerates over time instead of staying flat, which is what makes long-term saving so powerful.

The Rule of 72 offers a quick estimate: divide 72 by your annual rate to find how many years it takes money to double. At 7%, that's roughly ten years. The longer the time horizon, the more dramatic the effect.