Compound interest explained with real numbers β why starting 10 years earlier doubles the result
2026-09-22
Saving $300 a month at 7 % from age 25 to 65 ends near $790,000. Starting at 35 with the same $300 ends near $365,000. The extra ten years cost $36,000 in contributions and produced $425,000 more. That gap is compounding.
Open the calculator
How it works
Interest is added to the balance, and next period's interest is calculated on the new, larger balance. Monthly compounding at 7 % means 0.583 % each month on whatever is there. Early on the effect is small; after a couple of decades the interest earned each year exceeds what you contribute.
Rule of 72
Divide 72 by the annual return to estimate doubling time. At 7 % money doubles every ~10 years; at 4 % every 18. It also works in reverse for inflation: at 3 % prices double in 24 years.
What to plug into the calculator
- Long-term diversified stock index: 6β8 % nominal is the common conservative assumption
- High-yield savings: 3β5 %
- Subtract ~3 % inflation to think in today's money
- Compounding frequency matters far less than rate and time β monthly vs yearly at 7 % differs by about 0.2 % per year