What Is Compound Interest and the Rule of 72?

By Prince Gandomessi

Imagine you plant a money tree. At first, it’s just a small seed. But every year, the tree grows a little bigger—and it grows more money leaves. Then something amazing happens: the new leaves also start growing their own money leaves.

That’s what compound interest is.

Compound Interest: Money That Makes More Money

Let’s say you have $100, and you earn 10% interest every year.

In the first year, you make $10. So now you have $110.

In the second year, you earn 10% of $110—that’s $11. Now you have $121.

In the third year, you earn 10% of $121—that’s $12.10. Now you have $133.10.

See what’s happening?

You’re not just earning interest on your original $100—you’re earning interest on everything that’s already grown.

That’s why people say compound interest is like magic. It helps your money grow faster the longer you leave it alone.

The Rule of 72: A Shortcut to See How Fast Money Doubles

The Rule of 72 is a simple math trick.

It helps you figure out how long it takes your money to double, based on the interest rate you’re earning.

Here’s the trick: Take the number 72 and divide it by your interest rate.

That’s it.

Let’s try it:

If your money earns 6% interest, then 72 ÷ 6 = 12 years. → Your money will double in 12 years.

If your money earns 12% interest, then 72 ÷ 12 = 6 years. → Your money will double in just 6 years!

Now flip it:

If someone tells you it’ll take 9 years to double your money, you can figure out the interest rate: 72 ÷ 9 = 8% interest.

The Rule of 72 is a powerful shortcut that shows how time and interest work together to grow your money.

Why This Matters

Most people don’t realize how much their money could grow—if they just give it time.

If you save early, your money has more time to grow.

If you get a better interest rate, your money doubles faster.

If you do both? That’s how wealth gets built.

This is why it’s so important to learn about interest early—because the earlier you start, the easier it gets.

Final Thought

Compound interest is your friend.

It’s money that makes more money, all by itself. And the Rule of 72 is your cheat code—it shows how fast your money grows without needing a calculator.

Whether you’re 10 years old or 50, the lesson is the same:

Start early. Be consistent. Let your money grow. And before you know it, your money tree will be full of leaves.