Why Compound Interest is the "8th Wonder of the World"
Einstein reportedly called compound interest the eighth wonder of the world. "He who understands it, earns it... he who doesn't... pays it." It is the process where your interest earns more interest, creating a snowball effect that accelerates wealth creation over time.
Unlike simple interest, which only grows on your principal, compound interest grows exponentially. This is the primary engine behind the wealth of figures like Warren Buffett.
How to Use This Calculator
- Initial Investment: The cash you have on hand today to start.
- Monthly Contribution: The amount you can save from your salary each month.
- Annual Return: Historically, the US stock market (S&P 500) returns about 8-10% per year over long periods.
- Years: Time is your best friend. The longer you invest, the steeper the curve becomes.
Real Life Example: The Power of $100
If you start at age 25 and invest just $100 a month with an 8% return, by age 65 you will have invested $48,000 of your own money. However, thanks to compound interest, your account balance would be approximately $350,000!
Start your journey today. Use the tool above to map out your road to financial independence.