What is compound interest, and why does everyone worship it?

Compound interest means each period's interest gets added to the pile, so the next period's interest is calculated on a bigger pile. Simple interest on $10,000 at 8 percent pays $800 forever; compounded, year two earns 8 percent of $10,800, and thirty years later the account holds over $100,000 without another deposit. The shortcut is the rule of 72: divide 72 by the return to estimate doubling time, so 8 percent doubles in about 9 years and 6 percent in 12.

The catch is that it compounds against you identically. Credit card debt at 24 percent doubles in three years, which is why the same math that builds retirements also buries borrowers. Time is the dominant variable, and starting ten years earlier beats contributing twice as much later, a fact the math proves and almost everyone learns too late.