Question 1

What is compound interest?

Accepted Answer

Compound interest is interest calculated on both the initial principal and the accumulated interest. Unlike simple interest, it grows exponentially over time.

Question 2

How often should interest compound for best growth?

Accepted Answer

The more frequently interest compounds, the faster your money grows. Daily compounding yields slightly more than monthly, which yields more than annual. The difference grows with higher rates and longer periods.

Question 3

What is the Rule of 72?

Accepted Answer

The Rule of 72 is a shortcut to estimate how long it takes to double your money: divide 72 by the annual interest rate. At 7%, your money doubles roughly every 72/7 ≈ 10.3 years.

Question 4

Does monthly contribution matter a lot?

Accepted Answer

Yes — regular monthly contributions often contribute more to your final balance than the initial lump sum, especially over long periods. Even small amounts compounded over decades make a huge difference.

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