Finance Guide
How Compound Interest Grows Your Money Over Time
Learn how compound interest grows your money over time: the formula, real examples, the Rule of 72, and what Warren Buffett's 90/10 rule teaches investors.A dollar sitting in an account doesn't just wait around to become two dollars. Once it starts earning interest, that interest starts earning its own interest — and that one detail is the entire reason ordinary, unremarkable savings habits can turn into real money over time. Compound interest is interest calculated on both your original principal and on the interest that principal has already earned, so your balance grows by a slightly larger amount every period instead of the same flat amount each time. Simple interest, by comparison, only ever pays you based on your starting balance. The gap between the two looks tiny after one year. After twenty or thirty years, it isn't.
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