How compound interest actually works
Compound interest is interest earned on your interest. You start with a sum, it earns a return, and then that return also starts earning a return. Each cycle, the base your money grows from gets a little bigger — so growth accelerates rather than staying flat.
The formula behind the numbers above is A = P(1 + r/n)^(nt): a starting amount P, an annual rate r, compounding n times a year, over t years. Regular contributions each start their own compounding clock the moment they land, which is why consistent monthly deposits do so much heavy lifting.
Why time matters more than amount
The counterintuitive part — and the thing worth internalising — is that when you invest often matters more than how much. A smaller amount left to compound for forty years frequently ends up larger than a bigger amount compounding for fifteen. The early years look boring because the balance is small. The later years are where compounding stops being a rounding error and becomes the whole story.
