Lesson 4 of 5
The Magic of Compounding
🎯 In this lesson you'll learn:
- •Understand how compounding makes money grow faster
- •Learn the chessboard rice grains story
- •See why starting early matters
The Chessboard Rice Story
A long time ago, a smart mathematician invented chess. The king was so impressed that he said, "Name your reward!"
The mathematician said, "Just give me rice. Put 1 grain on the first square of the chessboard, 2 on the second, 4 on the third, 8 on the fourth — doubling each time."
The king laughed — that seemed like a tiny amount! But by the time he reached the 20th square, he needed over a million grains. By square 64, he'd need more rice than exists in the whole world!
That's the power of compounding — when your money grows, and then the growth grows too!
Money Compounding Example
Let's say you put ₹100 in a bank that pays 10% interest each year.
Year 1: ₹100 + ₹10 = ₹110 Year 2: ₹110 + ₹11 = ₹121 Year 3: ₹121 + ₹12.10 = ₹133.10
See what happened? In Year 2, you earned ₹11 instead of ₹10 — because you earned interest on your interest too!
After 10 years, your ₹100 becomes ₹259. After 20 years, it becomes ₹673. After 30 years? ₹1,745! Your money grew 17x without doing anything extra!
The Early Bird Wins!
Riya starts saving ₹100/month at age 10. Rohan starts saving ₹200/month at age 20. Both stop at age 60.
Riya invested for 50 years. Rohan invested for 40 years.
Even though Rohan saved TWICE as much per month, Riya ends up with MORE money because she started earlier and let compounding work longer!
Quick Check
Score at least 60% to complete this lesson.