Compounding effect

The compound interest effect is the most powerful tool for building wealth. The principle: you earn interest not only on the money you paid in, but also interest on the interest you have already received. That way your money grows faster and faster.

Example: €10,000 at a 7% return per year:

• After 1 year: €10,700 (+€700)
• After 10 years: €19,672 (+€9,672)
• After 20 years: €38,697 (+€28,697)
• After 30 years: €76,123 (+€66,123)

So in the last 10 years you earn more than in the first 20 combined! The earlier you start, the more powerful the effect.

The formula: final capital = starting capital × (1 + interest rate)^years. For €10,000 at 7% over 30 years: 10,000 × 1.07³⁰ ≈ €76,123.

The rule of 72 as a mental arithmetic trick: 72 divided by the interest rate gives roughly the number of years until your money doubles. At 7% your money doubles about every 10 years (72 ÷ 7 ≈ 10), at 2% only after 36 years.