The eighth wonder of the world.
attributed to Albert Einstein, possibly apocryphally
The simple version
Simple interest pays you on what you put in. pays you on what you put in, and on every dollar of interest you have already earned. Each year, the pile of money earning interest grows. So next year's interest is bigger. So the year after that, bigger still. And so on.
Try it yourself
Move the sliders. Notice the curve. For the first ten years, almost nothing happens. Around year fifteen, something changes. By year thirty, the line is no longer a line: it is going nearly vertical. That is .
Eight doublings is a working lifetime.
The same act of doubling repeats. The first few doublings look unremarkable. The last two or three is where most of the wealth shows up. That's why an extra decade at the end matters far more than an extra decade in the middle.
The lesson hidden in the curve
is the most valuable variable. Doubling your monthly contribution helps. Earning a slightly higher helps. But waiting ten years to start hurts more than either of those help.
The cost of waiting
Investing 200/month from age 25 to 65 at 7% gives you about 525,000. Wait until 35 to start, and you end up with about 244,000, less than half. Same monthly amount. Just ten fewer years of .