What is compound interest?
Compound interest means you earn a return on the return you have already earned. In year one, 10,000 at 7% gives 700. In year two, the 10,700 gives 749 — because the 700 is now working too. It sounds small, but the effect grows year by year, and after 30 years your 10,000 has become about 76,000. That is why time matters more than amount when you invest.
What it looks like over time
10,000 at 7% a year (roughly what broad stock markets have historically returned before inflation):
| Year | Amount | That year's return |
|---|---|---|
| 0 | 10,000 | — |
| 10 | approx. 19,700 | approx. 1,300 |
| 20 | approx. 38,700 | approx. 2,500 |
| 30 | approx. 76,100 | approx. 5,000 |
| 40 | approx. 149,700 | approx. 9,800 |
Note the last ten years: from 76,000 to 150,000. The final decade gives more than the first 30 years combined. The curve is flat at the start and steep at the end — that is what makes it hard to believe in.
The rule of 72
A quick mental sum: 72 divided by the return in percent = the number of years before the money doubles. At 7% that is 72/7 ≈ 10 years. At 3% it is 24 years. At 1% on a bank account it is 72 years. The rule also shows why costs matter so much: 7% minus 1.5% in fees is 5.5%, and a doubling then takes 13 years instead of 10.
It works against you too
Compound interest is the same thing that makes debt grow. 2,000 of credit-card debt at 20% is 4,100 after four years if you do not pay it down. That is why most advice about investing begins with: pay off expensive debt first. No stock reliably returns 20% a year.
The typical beginner's mistake
Waiting to start "until I have more money". 100 a month from age 25 gives, at 7%, around 240,000 by age 65. Starting at 35, the same amount gives about 110,000. Those ten years cost half — not because you put in less, but because compound interest got less time.
How you see it in Kiggo
Kiggo's "Get started" guide shows what a fixed monthly amount can grow into over 10, 20 and 30 years — as numbers, not promises. Kiggo's long-term ring is precisely about what can grow over time. The return is never guaranteed; only the maths is certain.
Related terms
Frequently asked questions
Does compound interest apply to stocks too?
Yes, even though there is no "interest". If your stocks rise 7% and the dividend is reinvested, it is the 107% that rises next year. The effect is the same — it is just called return on return.
What is the 7% based on?
Roughly what broad stock indices have historically returned on average per year over long periods, before inflation. It is an average over good and bad years — not a promise for the next one.
Do costs ruin compound interest?
They slow it down. 1% in yearly fees sounds like little, but it is 1% of the whole amount every year — including the part that would otherwise have compounded. Over 30 years it typically costs a quarter of the final sum.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-23.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
