The power of compounding is a myth
The power of compounding has been taught in schools all over the world for decades.
The power of compounding concept is basically showing the way money can grow.
If you have $100 saved up at the interest rate of 6%, and you do not spend the interest earned, the money will double every 12 years. That means $100 becomes $200 after 12 years, and become $400 after 24 years.
It seems very good on paper.
The reality is that nobody can guarantee an interest rate of 5% year after year.
Many people in developed countries have experienced a few years of low interest rate. When the average inflation is 4%, and the saving interest is 1%, your money actually shrinks.
The same story unfolds in the stock market too. Once a stock market crash happens, it can wipe out half your capital, and all of your paper profits.
This shows that the power of compounding is a myth. In reality, you have to protect your money so that inflation and stock market crash do not affect the value of your money.