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Compound interest is like a snowball rolling downhill. It starts small, but as it rolls, it picks up more snow and gets bigger and bigger, faster and faster.
Compound interest means you earn interest on your interest. If you have $100 earning 10% yearly, after year one you have $110. Year two, you earn 10% on $110, giving you $121.
Compound interest follows A = P(1 + r/n)^(nt). The frequency of compounding and time horizon create exponential growth curves that fundamentally differentiate wealth-building strategies.
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