Compound interest is a concept that anyone who wants to understand investing and accumulating wealth must grasp. It is so important that Albert Einstein reportedly referred to compound interest as the eighth wonder of the world and the most powerful force in the universe.

What Makes Compound Interest so Important?

In simplest terms, compound interest means you will make more money the longer your investment is able to work for you. When you invest in an appreciating asset, your money earns interest. As you accumulate interest you continue to make money on your initial investment, plus earn interest on top of the earned interest, which compounds year after year.

How could that measly 10% interest make any real money? This table shows how much a $1,000 investment would be worth at age 65 if it were invested at age 45 versus 25.

Interest Rate	Age 45	Age 25
4%	$2,222	$4,801
5%	$2,712	$7,040
6%	$3,310	$10,286
7%	$4,038	$14,974
8%	$4,926	$21,725
9%	$6,009	$31,409
10%	$7,328	$45,259

Here’s another example from Kiplinger’s, Behold the Miracle of Compound Interest:

Consider this: Amy, a 22 year-old college graduate, saves $300 per month [and invests this] into an account earning 10% per year for six years. (That’s the average annual return of the stock market over time). Then at age 28, she starts a family and decides to stay home with the children full-time. By then, Amy had kicked in $21,600 of her own money. But even if she doesn’t contribute another cent ever, her money would grow to a million bucks by the time she turned 65.

How Can I Take Advantage of Compound Interest?

The formula for calculating compound interest is: A = P(1 + r)ⁿ

Where: P = principle
r = interest rate
n = time, or the number years

With this in mind, you will want to start investing now with whatever you can contribute in order to take advantage of “n“. Time is your best friend when it comes to investing and compound interest, and a little money will go a long way.

The longer time you have, the more aggressive you may want to be in order to receive the greatest rate of return. Just look at the difference in return between 8 – 10%.

Millionaire Money Habit: Wealth creators know that you can’t mess with compound interest. If a 20-year-old invests just $100 a month and gains 10% annually, they will be a millionaire by the time they become 65-years-old. Be sure to read 9 Ways to Make an Extra $100 a Month to for some easy ways to boost your income part-time. -RT

Boosting your income just a little bit can go a long way. A 20-year-old, for example, who invests that $100 every month in a plain fund that tracks the S&P 500 will retire a millionaire. Here are 9 ways to generate an extra $100 a month.

1. Join an Affiliate Program: An affiliate program can offers great products and pays commissions for referring other people to the group. Over the course of time it could change your life as you earn commissions off your referrals’ referrals.
2. Sell on Ebay and Craigslist: That stuff sitting around collecting dust is valuable to somebody. Do some spring cleaning by selling some extra things around the house, or do some bargain hunting and flip your findings for a quick profit. Get a list of wholesalers and drop shippers to source hot products that move fast to sell.
3. Online Surveys: Get paid to take free online surveys. Completing just a few online surveys a month can be a quick way to make an extra $100/month in your spare time.
4. Word Processing: There are a lot of people who do not have a computer or know how to type well. Advertise your services to type up reports, letters and documents.
5. House Sitting: People who travel need their plants watered and their dogs walked. Put an ad on craigslist.org for your services and see if you can get paid to watch over their house for them.
6. Design Websites: If you are technically and graphically savvy, building custom websites can be a lucrative side business.
7. Baby Sit: Babysitting can pay handsomely if you create a niche for yourself.
8. Donate Plasma: Donating plasma is a process similar to donating blood, but pays about $25 and can be done once a week.
9. Mystery Shopper: Mystery shopping pays you to go shopping. Retailers and shoppers will pay you to pose as a legitimate shopper, even though you are actually rating employees and the store on attitude, cleanliness, etc.

Millionaire Money Habit: A small amount of money can go a long way when The Power of Compound Interest kicks in. Not having enough money to invest is an excuse that can easily be solved with a little extra effort.

This is a quick reminder about this week’s contest (link) to win a free copy of The Rules of Money. The contest ends on Friday at midnight. Will you be the winner?

One winner will be selected from the following categories:

• Most Traffic: The website that sends the most visitors to Millionaire Money Habits will be awarded. The traffic can originate from a single link to a particular article on this site, or multiple links. It doesn’t matter how you drive traffic, only how much traffic counts.
• Comment Counts: The reader who makes the greatest contribution by commenting wins. In order to keep comments pertinent and of value, a point system will be used for each comment. 1 point will be awarded for comments that don’t facilitate discussion, and 5 points for each comment that offer a substantial contribution to the article’s topic. Comments can be added to any article on this site, and the commenter with the most points wins.
• Random Subscriber: A new subscriber to Millionaire Money Habits’ RSS feed will be randomly selected to receive a copy of this book. All you need to do is subscribe to this site by filling out the “Receive email updates” form found at the top of the left sidebar. Be sure to check your email to confirm and validate your subscription.

Results of the winners and runner-ups will be announced on Sunday.

Good luck!