Compound Interest Explained
How compound interest turns modest, consistent contributions into meaningful wealth — with a calculator you can use in seconds.
The math in one sentence
Compound interest is interest earned on interest. Reinvesting your returns causes the balance to grow exponentially rather than linearly.
The Rule of 72
Divide 72 by your annual return to estimate how long it takes to double your money. At 7% returns, doubling takes about 10.3 years.
Frequently asked questions
Do bonds compound too?
Yes — as long as you reinvest coupon payments, your bond returns compound.
Bottom line
Understanding compound interest explained is one of the highest-leverage things you can do for your financial future. Bookmark this guide, share it with a friend, and use the calculators linked below to run the math on your own numbers. Money decisions are rarely urgent, but they compound — so a good decision today easily becomes an outsized win a decade from now.
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Reader comments (3)
This finally cleared up something my previous advisor kept hand-waving. Bookmarking.
Would love a follow-up piece on how this changes for self-employed households.
Really appreciate that you cited primary sources — most sites don’t.