The Power of Compound Interest
Albert Einstein reportedly called compound interest the "eighth wonder of the world." Unlike simple interest (calculated only on principal), compound interest earns interest on your accumulated interest — creating exponential growth over time.
Compound Interest Formula
A = P(1 + r/n)^(nt)
Where A = final amount, P = principal, r = annual rate, n = compounding periods per year, t = time in years.
Why Starting Early Matters
If you invest $10,000 at age 25 at 7% annually, it grows to ~$149,745 by age 65. The same investment made at age 45 only grows to ~$38,697. Starting 20 years earlier yields 4× more money — this is the time value of money in action.