How To Double Your Money In 7 Years, According To Jim Cramer

Albert Einstein reportedly said that the "most powerful force in the universe" is compounded interest, a theory that CNBC's Jim Cramer might agree with.

Any investor, even those with low paying jobs, can grow their wealth over the longer term due to compounding interest, Cramer explained during his daily "Mad Money" show recently. Taking just $100 and investing it in the S&P 500 index or its related ETF, the SPDR S&P 500 ETF Trust SPY, at an average return of 10 percent gives investors "additional money off of last year's profits."

Due to compounding interest, a $100 investment will double in value in roughly seven years, Cramer continued. While the prospect of waiting seven years to double an investment is a difficult concept for many investors the fact is this is a "pretty incredible" return — a concept young investors will come to realize over time.

"The magic of compounding works best the younger you are because that means you have more time for your money to grow," Cramer emphasized.

Consider a young person who just entered the workforce and figures their career will span 40 years. Investing $10,000 in the S&P index after the first year and letting it sit idly for four decades could be worth more than $450,000 at the time of retirement, assuming the stock market performs the same it has over the past 90 years.

Related Links:

Cramer To Parents: Invest In Your Kid's Future ASAP

Cramer Offers Tips On When To Sell A Hot Stock