Compound interest means your interest earns interest. In year one, only your money works; by year ten, the interest from the previous nine years is working too. The effect is quiet at first, then becomes the main engine of your savings.
Final balance = starting amount × (1 + rate)years. At 7% a year, $1,000 becomes $1,070 after one year and $1,144.90 after two (the $70 of interest earned $4.90 on its own), and so on.
| Time | At 5% a year | At 7% a year |
|---|---|---|
| 10 years | ≈ $16,300 | ≈ $19,700 |
| 20 years | ≈ $26,500 | ≈ $38,700 |
| 30 years | ≈ $43,200 | ≈ $76,100 |
| 40 years | ≈ $70,400 | ≈ $149,700 |
Constant return, compounded annually, before fees, taxes and inflation.
At 7%, money roughly doubles every 10 years: $10,000 → $19,700 → $38,700 → $76,100 → $149,700. The last decade alone adds more than the first three combined.
Two savers put away $200 a month until 65, earning an average 7% a year:
| Start at 25 | Start at 35 | |
|---|---|---|
| Years saving | 40 | 30 |
| Total contributed | $96,000 | $72,000 |
| Balance at 65 | ≈ $525,000 | ≈ $244,000 |
Ten extra years and $24,000 more in contributions produce more than twice the balance.
Divide 72 by the annual return to estimate how many years it takes to double your money. At 6%: 72 ÷ 6 = 12 years (the exact answer is 11.9). At 8%: 9 years. At 3%: 24 years.
The simulator shows the interest earned each year and the year it overtakes your contributions: your crossover point.
Open the simulator →