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Infographic: Visualizing the Extraordinary Power of Compound Interest
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Visualizing the Extraordinary Power of Compound Interest

Visualizing the Extraordinary Power of Compound Interest

The power of compound interest is so compelling, that it’s been often called the “eighth wonder of the world”.

Find out why this concept is so fundamental to personal finance in the following infographic:

Visualizing the Extraordinary Power of Compound Interest

Think you already know how to use and calculate compound interest?

Check out this exercise created by Next Gen Personal Finance and see how you do. There are also many other free personal finance lessons available in the activities section of their website.

What is Compound Interest?

Simply put, it’s interest on interest.

In the first compounding period, that interest is small – but in the long run, interest on interest is a big deal!

How interest compounds depends on three variables:

Interest Rate: The rate earned from savings or an investment
Time: The length of time money is left to compound
Taxes: The timing of taxation can make a big difference

Learn more

Get free lesson plans and resources on personal finance from our co-founder Next Gen Personal Finance.

Be the first to see all future personal finance infographics by getting on Visual Capitalist’s free email list.

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Jeff Desjardins

Jeff is the Editor-in-Chief of Visual Capitalist, a media site that creates and curates visuals on business and investing. He has been quoted or featured on Business Insider, Forbes, MarketWatch, The Huffington Post, The World Economic Forum, and Fast Company.

4 Comments
  • Dave

    Too bad our need to purchase material things and debts / loans may minimize the gains

    March 28, 2018 at 7:51 pm Reply
  • Yao Ndri Germain

    Great

    March 28, 2018 at 8:15 pm Reply
  • Randy

    In example #3, what is the assumed interest rate??

    March 28, 2018 at 9:27 pm Reply
    • Jeff Desjardins

      Great point.

      It’s at 7%, which is the average return of the stock market over time. We’ve added that point in now (above that visualization). Thanks for mentioning that!

      March 28, 2018 at 9:40 pm Reply

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