Understanding Compound Interest

Compound interest is often described as the eighth wonder of the world. The math is simple, but the intuition is not. Small differences in rate or time produce dramatically different outcomes over decades.\n\nThe key insight is that compounding is nonlinear. Doubling the time horizon more than doubles the outcome. This is why starting early matters more than optimizing rate. A ten-year head start typically beats a two-percent higher return over a working career.