# PP

# Newsletters

# Harnessing the Power of Compound Interest for Learning

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This month, we are exploring the power of Compound Knowledge.

With my kids, I’ve often noticed that **knowledge grows exponentially**. Here’s what really excites me.

When an effective learner adds 2 bits of new knowledge to 2 bits of existing knowledge, they get not 4 bits of knowledge, but 8, 16, 24……units of new knowledge can possibly be created. With each additional bit of knowledge an **effective learner **absorbs, connects, and applies, she is able to create exponential value.

The value comes in the form of new ideas, new ways to collaborate, new solutions to old problems, deeper understanding and so much more.

Borrowing from the world of finance, this can be compared to the idea of compound interest.

Albert Einstein called compound interest the “eighth wonder of the world” and with good reason.

The rate at which compound interest adds up depends on the frequency of the ‘compounding periods’.

The higher the frequency, the greater the compound interest – on the same principal, at the same time.

In other words, the more *often or frequently* we add interest (new knowledge) to the principal (existing base of knowledge), the higher total interest (value creation) we will earn over the life of our investment (building our effective learning skills).

In numbers, that means, if you invest $100 today, an *annual* compounded interest rate of10% will deliver lower results than a semi-annual compound rate of 5% - over the same time period! If you learn more frequently, you will get better long-term learning outcomes than if you crammed it all up once a year for the exam.

So, this month, let's borrow a model from the world of finance and see how our young learners can make the most of the compounding effect of knowledge.