There are stories – some partly legendary, others documented – about small sums left one or two centuries ago, through a will or a forgotten deposit, in an account earning compound interest, which ended up, through the simple passage of time, worth tens or hundreds of times the original amount.
The mechanism behind it isn’t mysterious at all – compound interest simply means that the interest earned goes on to earn interest itself. The huge difference comes from time, not from the rate: a small percentage, applied consistently over decades, produces results that are hard to imagine intuitively.
Albert Einstein is often quoted, though probably apocryphally, calling compound interest “the eighth wonder of the world” – a charming exaggeration, but one that captures well how counterintuitive its effect can be over a very long term.
You don’t need centuries to see the effect – just time and consistency, on a much more realistic scale.
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