Compound interest is interest earned on interest. Over time this creates exponential growth.
The Math That Changes Everything
Invest $5,000 at age 25 at 8% annual return and it grows to $159,602 by age 65. Wait until 35 and it only grows to $73,927. Ten years costs you $85,675.
How to Use Compound Interest
Open an investment account. Buy index funds. Reinvest all dividends. Never withdraw early. Add money monthly. Let time do the heavy lifting.
The Dark Side
Credit card debt compounds at 18-25% annually. A $3,000 balance paid at minimums can take 10 years and cost $6,000 in interest.
