The eighth wonder of the world
Compound interest means your gains start earning gains. The longer the time horizon, the more the curve bends upward — which is why starting early beats investing more later. In a long-run plan, the majority of your final balance often comes from growth, not the money you put in.
The two biggest levers are time and rate of return. Even a few extra years, or a couple of percentage points, can change the outcome dramatically thanks to compounding.
Try this
Set a modest monthly contribution over 30+ years and watch how the "interest earned" line eventually dwarfs what you actually contributed.
Common questions
The US stock market has averaged roughly 10% per year before inflation (about 7% after) over the long run. Many people use 7% for a conservative, inflation-adjusted estimate. Savings accounts and CDs return far less.
It's earning returns on your returns. Each period's growth is added to the balance, so the next period grows from a larger base. Over decades, this snowball does most of the heavy lifting.
Monthly, which matches how most contributions and accounts work. More frequent compounding makes a small difference over long periods.
No. The result is a nominal balance. For purchasing power, use a lower "real" return (around 7%) to roughly account for inflation.