Why compound interest is called the 8th wonder
Compound interest means your interest earns interest. ₹1,00,000 at 10% for 10 years with simple interest becomes ₹2,00,000 — with quarterly compounding it becomes ₹2,68,506. The difference grows with time: at 30 years, simple gives ₹4,00,000 but compounding gives ₹19,41,902. Time is the multiplier — that's why starting early beats investing more, later.
- Rule of 72: years to double = 72 ÷ rate. At 10% → 7.2 years; at 12% → 6 years.
- Banks use quarterly compounding for FDs and RDs — see our FD and RD calculators.
- The same math works against you on credit card debt — 42% p.a. compounding daily is brutal. Use the payoff calculator to see it.
Frequently Asked Questions
A>Interest calculated on the principal plus previously earned interest — so your money grows faster over time.
A>FDs and RDs: quarterly. Savings accounts: quarterly or monthly. Loans: monthly (reducing balance).
A>Divide 72 by your annual rate to estimate years to double your money. E.g., 72 ÷ 9% = 8 years.
A>Simple interest pays only on the principal; compound interest pays on principal + accumulated interest. Over long tenures the difference is huge.
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