Understanding Compound Interest: The 8th Wonder of the World

Compound interest is often referred to as the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it.

What is Compound Interest?

Simply put, compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. It's interest on interest.

Why it Matters

When you invest money, you earn a return. If you reinvest that return, the next time you earn a return, it's on a larger base amount. Over long periods, this creates an exponential growth curve.

Use our PersonalROI calculator to see this in action. Try changing your time horizon from 10 years to 30 years and watch the total value explode.