The Power of Compound Interest

The Eighth Wonder of the World

Compound interest is earning returns not just on your original investment, but on all previous returns as well. Einstein allegedly called it the eighth wonder of the world. Whether he said it or not, the math is staggering.

$10,000 invested at 8% average annual return:

Years	Value
10	$21,589
20	$46,610
30	$100,627
40	$217,245

That $10,000 turned into $217,000 without touching it. You didn't work harder. You just waited.

Time Is the Variable That Matters Most

The single most important factor in compound growth is time. Starting 10 years earlier can mean having twice as much money at retirement — not because you invested twice as much, but because your money had longer to compound.

The cost of waiting:

• Invest $500/month from age 25 to 65 at 8%: ~$1.74 million
• Invest $500/month from age 35 to 65 at 8%: ~$734,000

Starting 10 years earlier more than doubled the result — even though you invested $60,000 more.

Dollar-Cost Averaging

You don't need a lump sum to benefit from compounding. Investing a fixed amount every month (dollar-cost averaging) means:

• You buy more shares when prices are low
• You buy fewer shares when prices are high
• You remove emotion from the equation entirely

Set up automatic monthly investments and let the math work.

The FI Insight

For the FI community, compound interest is the engine. Your job is simple: maximize the amount you invest and the time it has to compound. Every dollar invested today is doing work for you 24 hours a day, every day, for decades. The earlier you start, the more of that work gets done before you need to stop.