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Compound interest is interest calculated on both your initial principal and the accumulated interest from previous periods. Unlike simple interest (which only earns on the principal), compounding means your interest earns interest — causing your money to grow exponentially over time.

The more frequently interest compounds, the faster your money grows. Daily compounding produces slightly more than monthly, which produces more than annual. For most savings accounts and investments, the difference between daily and monthly is small — the rate and time invested matter far more.

The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual interest rate. At 6% interest, your money doubles in roughly 72 ÷ 6 = 12 years. It's a useful mental shortcut for comparing investment options.

Enormously. Starting 10 years earlier can result in 2–3x more wealth at retirement, even with the same total contributions, because of the extra compounding time. The first dollars invested are always worth the most — they have the longest time to compound.

For long-term stock market investments, 7–10% is a commonly used historical average annual return (before inflation). For high-yield savings accounts, 4–5% is typical in 2025. For conservative bond portfolios, 3–5% is reasonable. Always use realistic rates for planning.

Yes. If your investment earns 7% annually but inflation runs at 3%, your real (inflation-adjusted) return is closer to 4%. For long-term planning, consider using a real return rate (nominal rate minus inflation) to get a more accurate picture of future purchasing power.