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Why €10,000 doesn't become €25,000 after 30 years.

With compound interest you earn interest on interest already credited. €10,000 at 5% grows to €25,000 after 30 years without compounding. With compounding it reaches about €43,200, because each interest payment enlarges the capital that earns interest next year. The curve gets steeper every year.

Useful: The earlier you start, the more of the work time does instead of you.

Source: de.wikipedia.org

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Difficulty:

Question on this card

What makes compound interest so powerful?

  1. Higher bank interest rates
  2. Interest earned on interest already received
  3. Tax-free interest
  4. Monthly instead of yearly payouts
Show the answer

Correct: Interest earned on interest already received

Interest is added to the capital and earns interest itself the next year.

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