Compound Interest — The 8th Wonder

$100 at 10% interest becomes $110 after year 1. Then $121 after year 2. Why does this matter? Understanding exponential money growth is a skill that will help you in school, in friendships, and in solving real-world problems. People who master this skill make better decisions and understand the world more clearly. Here's the process: Step 1 — Define the challenge. What exactly are you trying to figure out? Being specific about the question is half the battle. Step 2 — Gather information. What facts do you have? What might be missing? Not all information is equally useful — focus on what's relevant. Step 3 — Consider multiple options. Don't stop at your first idea. Challenge yourself to think of at least three alternatives. Often the best answer is one you didn't think of immediately. Step 4 — Evaluate your options. What are the pros and cons of each? What evidence supports each one? Which option has the strongest reasoning behind it? Step 5 — Make your choice and explain your reasoning. "I think ___ because ___" is the formula. Being able to explain your thinking is just as important as getting the right answer. Step 6 — Reflect. Was your approach effective? What would you do differently next time? This reflection step is how good thinkers become great thinkers.