Compound Interest and the Rule of 72

-Compound Interest is basically, when interest is added to a principal. This addition is called compounding and therefore the interest added to the principal also gains interest. Investing in retirment with compound interest can be highly beneficial through out the years do to the added interest growth or "compound".

-The rule of 72 providesthe best approximation for annual compounding. It lets you know at around what time yoru investment will double, therefore letting you know if you are making the right choice in investing with a certain company or if you're better off going somewhere else with your money. When you divide 72 by the annual rate of return, you will see the rough estimate of when your investment will prosper.

For example, the rule of 72 states that $1 invested at 10% would take 7.2 years ((72/10) = 7.2) to turn into $2. In reality, a 10% investment will take 7.3 years to double ((1.10^7.3 = 2).