Getting Rich with the power of Compound Interest

Albert Einstein is credited with saying that “compound interest is the most powerful force in the universe”. Though it is doubtful he actually said this, the idea is true, at least when it comes to building wealth. The power of compound interest comes from the fact that with each iteration interest is earned on not only the principal but on the preceding iterations interest. A simple way to see this power is in a children’s riddle; if on the first day you receive a penny and on the second day 2 pennies and each day the amount doubles (or 100% compound interest), when will you receive a million dollars? The answer: the 31st day.

This may sound farfetched to you, after all where can you get 100% interest, but consider the “Rule of 72”. If you take 72 and divide it by the interest you are receiving, say for this example 10%, you have how many iterations it takes for your money to double. For this example it would be 72 divided by 10, which would equal just over 7. If this interest is compounded yearly, your money would double roughly every 7 years. Compound interest can be your greatest ally in building wealth.