Compounding and the Rule of 72: How Time Becomes Money

Compounding is “interest earning interest.” Because returns accrue not only on your principal but on past gains too, the curve steepens the longer you stay in.

Simple vs. compound interest

Simple interest accrues only on principal; compound interest accrues on the whole growing balance each year. The gap looks small early on, but over 10 or 20 years it widens dramatically.

The Rule of 72 — doubling time in your head

72 ÷ annual return is roughly the number of years to double. At 8% a year that’s about 9 years; at 6%, about 12. It shows intuitively how much sooner you double when the return rises even a little.

Add regular contributions

Adding monthly contributions to your initial investment keeps the principal itself growing, so compounding multiplies. Try different periods and rates in the calculators below and watch the curve.