Compound interest
Interest earning interest: capital grows exponentially.
12 years
Doubling at 6%
24 years
Doubling at 3%
Interest that earns interest
With compound interest, each year’s gains are added to the capital and earn in turn. Growth becomes exponential: slow at first, spectacular in the long run. That is why time matters more than the amount when building wealth.
Compound interestSimple interest
Formula
Capital final = capital initial x (1 + taux)^années
- Rule of 72: capital doubles in about 72 / rate years
Worked example
€10,000 at 5% for 40 years
- After 10 years: 10,000 x 1.05^10 = €16,289.
- After 20 years: €26,533. After 30 years: €43,219.
- After 40 years: €70,400, against €30,000 with simple interest.
The last 10 years earn more than the first 25.
Common mistakes
- Delaying your first investments by ten years: you lose the years where the effect is strongest.
Notitia newsroom · education, not investment advice.