Compound Interest: The Math That Makes Millionaires

Albert Einstein supposedly called compound interest the eighth wonder of the world. Whether he actually said it or not, the math checks out. Here's why.

Simple Example

You invest $10,000 at 8% annual return. After year 1, you have $10,800. Year 2, you earn 8% on $10,800 (not just the original $10,000). That's $11,664. Each year, you earn returns on your previous returns.

After 30 years, that $10,000 becomes $100,627. You didn't add a single dollar. You 10x'd your money by doing nothing.

The Real Power: Regular Contributions

$10,000 one-time is nice. But $500 per month is where it gets wild.

• $500/month for 10 years at 8%: $91,473 (you put in $60,000)
• $500/month for 20 years at 8%: $294,510 (you put in $120,000)
• $500/month for 30 years at 8%: $745,180 (you put in $180,000)
• $500/month for 40 years at 8%: $1,745,504 (you put in $240,000)

That last number is not a typo. $500 per month, started at age 25, makes you a millionaire by 60 and nearly $1.75M by 65. And you only contributed $240,000 of your own money. Compound interest generated over $1.5 million.

Run Your Own Numbers

The Compound Interest Calculator lets you plug in your starting amount, monthly contribution, interest rate, and time horizon. Watch the curve go exponential.

Why Starting Early Matters More Than Starting Big

Someone who invests $300/month starting at age 22 will have MORE money at 65 than someone who invests $600/month starting at age 32. Starting 10 years earlier with half the money wins. Time in the market beats timing the market, and it really beats procrastinating.