Einstein allegedly called compound interest the "eighth wonder of the world". Those who understand it, earn it; those who don''t, pay it.
The formula
A = P × (1 + r)^n. A is the amount, P the principal, r the rate per period, n the number of periods.
Example
$1,000 at 1% monthly for 24 months → $1,269.73. At 1% monthly for 240 months (20 years) → $10,892.55. The effect explodes long-term.
Application
For debt, compounding is the enemy (credit cards). For investing, it''s your best friend — start early.