Compound interest: The Eighth Wonder of the World
" Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it. " Compound interest is often called the eighth wonder of the world, a term attributed to Albert Einstein. He famously stated, " He who understands it, earns it. He who doesn't, pays it. " While this might sound like an exaggeration, the math behind it reveals its profound truth. Compound interest occurs when the interest earned is reinvested, allowing the investment to grow exponentially over time. This phenomenon, often referred to as "interest on interest", accelerates wealth accumulation and has been celebrated by great minds throughout history. Benjamin Franklin famously remarked, " Money makes money. And the money that money makes, makes money. " Similarly, Warren Buffett likened it to rolling a snowball (investment) down a long hill, where time and consistency lead to exponential growth. Let's now explore this concept...