Compound Interest
Interest calculated on the initial principal and on the accumulated interest of previous periods.
4 min readUpdated July 17, 2026
The formula
A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding periods per year, and t is time in years.
The power of time
Because interest earns more interest, small amounts saved early can outgrow much larger amounts saved later. Starting a decade earlier can more than double a retirement fund.
Rule of 72
A quick shortcut: divide 72 by the annual rate to estimate how many years it takes for money to double.