Albert Einstein said Compound Interest is “the 8th wonder of the world. He who understands it, earns it; he who doesn’t pays it.” This is a great quote about compounding interest. If you think about it hard the best and worst part about money is the compounding interest.

With a massive credit card debt with an interest rate of 22% or higher can really compound and make debt spiral out of control.

That interest will compound and double faster than you know it. On the other hand, if you have some great investments that are reaping 6-10% then your money will grow and grow.

“Compound Interest is the 8th wonder of the world. He who understands it, earns it; he who doesn't pays it.”

So how can compounding interest double my income? That is a great question. I want to start off with a quick question. Would you rather have a penny that doubles each day of the month or $1 million?

The Double Penny Story

I have heard this question before, and most people without thinking would take $1 million dollars over the $0.01 doubling every day. Most people are all about instant gratification. Patience is a virtue (as my dad has always said). So let’s break down the numbers and think.

If you start off with one penny on day one, by day 3 it is 4 pennies, which is not so much. As it keeps doubling the amount becomes more. Day 9: it becomes $2.56. Day 13: It becomes $40.96. It keeps growing and doubling.

This doubling is all part of the power of compound interest. Compound interest is the interest upon interest.

The Power of Compound Interest

Say you invest $1000 at 10%, you will then earn $100. The next year it would be $110 since it would be $1100. At 10% the money will not double as fast as the penny since the penny was doubling at 100% every single day.

The way people figure out how long it takes their money to grow is thinking about the Rule of 72 The Rule of 72 is an easy way to figure out how long it takes for an investment to double. Simply put: Years to double =72/interest rate.

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