Compound interest is the boring answer to almost every personal-finance question. It's also, if you let it run long enough, the most outrageous force in money. Here's the version that fits on a napkin.

The two-line definition

Simple interest pays you on what you put in. Compound interest pays you on what you put in plus on every cent of interest you've already been paid. It's interest earning interest earning interest, all the way down.

That sounds small. It isn't.

The €25 example

Imagine grandma puts €25 into a global ETF for a newborn. Average return: ~8% per year (the long-run average for global equities, with inflation, dividends, and crashes all baked in).

After year 1: €27. Boring.

After year 5: €37. Still boring.

After year 10: €54. The €25 has more than doubled.

After year 18: €100. The original gift has quadrupled.

Now imagine grandma puts in €25 every birthday and every Christmas instead of just once. Same 8%. Same 18 years.

The kid has roughly €2,400 on their 18th birthday from grandma alone, having received about €900 of contributions over the years. Most of the difference is the compounding doing its work in the background while everyone got on with their lives.

The rule of 72

The math trick worth remembering: divide 72 by the annual return, and you get the number of years for the money to double.

  • At 8% per year, money doubles every 9 years.
  • At 4% per year, money doubles every 18 years.
  • At 1% per year (a savings account), money doubles every 72 years.

This is why where you keep the money matters more than how much you keep. €100 in a savings account is still roughly €100, real-terms, in 18 years. €100 in a broad ETF is roughly €400. Same person, same money, two completely different futures, decided by a single boring choice.

The catch

Compound interest needs time to work. Most adults find it because they finally have surplus money in their thirties, by which point they've burned the most valuable decade of compounding they'll ever own.

A kid born in 2026 has eighteen years of "free" compounding before they earn their first euro. That's the asset we're trying to capture before they outgrow it. You can't buy that decade back.