Imagine that we just opened a new savings account that pays 10% interest compounded annually. In reality, we would get something closer to 0.1% interest compounded continuously, but let’s keep the numbers large and whole for now.
If we opened the account with $100, after a year we would $110, and after two years we would have $121. How long will it take us to double our money? You may have heard of the Rule of 72 which is a trick for answering this question. Before we get into how it works, let’s review how compound interest works.