The magic of compounding
In this lesson you'll learn:
- Understand what compound interest means
- See why starting to save early matters more than anything else
Albert Einstein reportedly called compound interest the 8th Wonder of the World. He who understands it, earns it; he who doesn't, pays it!
Compounding is when the interest you earn also earns interest. Your money makes more money, and then that extra money makes even more money, like a rolling snowball!
Interactive Compounding Snowball Simulator
Adjust the monthly savings and time horizon to see compounding create real wealth:
The 8th Wonder: Compounding Snowball
When your money earns interest, and that interest earns even more interest, your money multiplies like a rolling snowball!
Try the Quick Compounding Math Demo
See compounding in action
Money you save earns interest. That interest then earns its own interest. Try changing the numbers to see how it grows.
After 20 years
₹4,661
Interest earned
₹3,661
Money multiplied by
4.7×
The Early-Bird Rule
The earlier you start saving, the more time compounding has to work. A child who saves just ₹500 a month from age 10 will end up with far more wealth than someone who starts saving ₹2,000 a month at age 35!
Quick check
1. What does "compounding" mean?
2. Why is starting to save at age 10 better than starting at age 30?
3. If you invest ₹1,000 every month at 12% returns for 20 years, what grows larger?
Checkpoint locked
Score at least 60% on the quiz above to unlock the next lesson.