Entry № 15 · logged Oct 3, 2026Free, no sign-upCompound Interest · Investing

How compound interest works: last month’s interest earns interest.

Simple interest pays on the deposit. Compound interest pays on the deposit plus every prior month’s interest — which is why the curve bends. Post any starting balance and deposit below and watch the interest line detach from the deposit line year by year.

The bend in the curve is not a metaphor. It is the year the interest line passes the deposit line — find it in the table.

The growth ledger, Form CI-15. Post a starting balance and a monthly deposit; the slip compounds interest monthly, posts the year-by-year balance, and separates what you deposited from what growth added.

What you post Starting amount ($) Already saved or invested today. Zero is a fine start — the deposit does the early work. Monthly deposit ($/mo) Posted at the end of each month, after that month’s interest.

How it grows Annual return (%) A savings account might post 4%; a diversified portfolio has averaged near 7% after inflation-free math. Returns are never guaranteed. Years Inflation (%) Only drives the “today’s dollars” line — what the final balance buys in current terms.

Year	You posted	Interest posted	Balance

Math: each month the balance earns one-twelfth of the annual return, then your deposit posts. Steady returns are a modelling convenience — real markets wander year to year, and taxes and fees are not in this ledger.

Rule of 72 Calculatorthe doubling shortcut, checked against the exact math Compound vs Simple Interestthe same deposit, two very different ledgers How Long to Double Your Moneydoubling time at every return, in one table Monthly Investment Calculatorno lump sum? the deposit-only ledger Compound Interest Calculatorthe main slip: deposits vs growth, posted

From the ledger

The mechanism, without the mystique

Month one: $10,000 at 7% earns about $58. Post a $300 deposit and month two starts on $10,358 — so month two’s interest is calculated on the deposit, the first deposit, and the first $58. Each month the base grows by interest plus deposit, and the interest slice grows with it. Nothing exotic happens in any single month; the compounding is the accumulation of 240 unremarkable months refusing to reset.

That is also why time beats amount early. Doubling the deposit doubles the deposit line but barely moves the crossing year; adding ten years moves everything, because the last decade of a 30-year ledger posts more interest than the first two combined. The table above is the proof — read the interest column top to bottom.

Filed answers

Questions from the growth desk

What is the one-sentence version?

Compound interest is interest earning interest: each period’s growth joins the balance and grows in every later period.

Why does starting early matter so much?

Because the largest interest postings sit at the end of the ledger. Starting ten years earlier does not add ten average years — it adds the ten biggest ones.

Is this investment advice?

No — arithmetic on numbers you type.

Keep going

Also in the ledger

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