Compound Interest: Why Money Grows Faster Than You Think

Imagine you save $1,000 and it earns 10% a year. After year one you have $1,100. In year two you earn 10% not just on your original $1,000, but on the $1,100 — so you gain $110 instead of $100. That extra $10 is compound interest: interest earning interest. Each year your gains get their own gains, and the pile grows on itself.

Because growth builds on previous growth, the curve isn't a straight line — it's exponential. It starts slow and then bends sharply upward. That $1,000 at 10% becomes about $2,600 in 10 years, roughly $6,700 in 20 years, and over $17,000 in 30 years. Notice the jumps get bigger and bigger even though nothing new was added — the money did the work.

This is why starting early beats saving more. Time is the ingredient compounding needs most. Someone who invests $2,000 a year from age 25 to 35 and then stops can end up with more at retirement than someone who invests the same $2,000 every year from 35 to 65 — because the early money had extra decades to double and double again.

Compounding is the engine behind almost everything else in finance. It rewards patience and punishes waiting, so the single most powerful move is simply to begin.