What is Compounding Interest Compounding interest is a powerful financial concept It turns small consistent investments into big sums over time The interest earned is reinvested creating a snowball effect that grows the investment exponentially The Magic of Compounding The magic of compounding is amazing It can turn small amounts into huge wealth By reinvesting the gains the investment grows faster and bigger This is known as the time value of money where longer investments grow more The Snowball Effect The snowball effect is a great way to describe compounding As the investment grows so does the compounding Small regular contributions can grow into big sums with time and consistent reinvestment of compound interest This table shows how a investment with an annual interest rate grows The compounding effect is clear with the total balance increasing a lot each year It shows the power of compound interest Compound interest is the eighth wonder of the world He who understands it earns it he who doesn't pays it - Albert Einstein The Power Of Compounding The true power of compounding is in its ability to grow wealth exponentially over time At first the gains might seem small But as time goes on compounding can build wealth at an incredible rate This is because each return is reinvested leading to even more returns This creates a snowball effect where wealth grows faster and faster It far surpasses the slow growth of linear increases The longer you let compounding work the more impressive... Login to read full