Compound Interest Calculator

Enter your details below to calculate how your savings or investments will grow over time with compound interest.

Compound Interest Calculator Overview

Inputs:
  • Initial Investment ($)
  • Regular Contribution ($)
  • Contribution Frequency (Monthly/Yearly)
  • Annual Interest Rate (%)
  • Compounding Frequency (Daily/Monthly/Quarterly/Yearly)
  • Time Period (Years)
Output:

Future value of your investment, total interest earned, yearly breakdown, and comparison of compounding frequencies.

Formula:

Uses the compound interest formula: A = P(1 + r/n)^(nt), where:

  • A = Future value
  • P = Principal (initial investment)
  • r = Annual interest rate (as a decimal)
  • n = Number of compounding periods per year
  • t = Time in years

Regular contributions are added at the end of each contribution period and also earn compound interest.

Understanding Compound Interest

How Compound Interest Can Grow Your Savings

Compound interest is often called the "eighth wonder of the world" because it allows your savings to grow exponentially over time. Unlike simple interest, which is calculated only on the principal, compound interest is calculated on the principal plus the interest earned in previous periods.

  • Start Early: The earlier you start investing, the more time your money has to compound. Even small amounts can grow significantly over decades.
  • Compounding Frequency Matters: More frequent compounding (e.g., daily vs. yearly) results in higher returns because interest is added to the principal more often.
  • Regular Contributions: Adding to your investment regularly can significantly boost your returns, as each contribution also starts earning interest.

Frequently Asked Questions

Compound interest is the interest earned on both the initial principal and the interest that has been added to your investment over time. It allows your savings to grow exponentially, as you earn interest on interest. The formula is A = P(1 + r/n)^(nt), where A is the future value, P is the principal, r is the interest rate, n is the number of compounding periods per year, and t is the time in years.

Compounding frequency determines how often interest is added to your principal. More frequent compounding (e.g., daily vs. yearly) results in higher returns because interest is calculated on the accumulated interest more often. For example, $10,000 at 5% annual interest compounded daily will grow more than the same amount compounded yearly over the same period.

Starting early maximizes the power of compound interest. Even small investments can grow significantly over time due to the exponential effect of earning interest on interest. For example, investing $1,000 at age 20 with a 5% annual return will grow to over $7,000 by age 60, while the same investment at age 40 will only grow to about $3,200.

Use this calculator to estimate how your savings will grow over time. Enter your initial investment, regular contributions, interest rate, compounding frequency, and time period to see your future value. The interactive chart and comparison table help you understand the impact of different compounding frequencies and plan your investments accordingly.

The Rule of 72 is a quick way to estimate how long it takes for an investment to double at a fixed annual interest rate. Divide 72 by the interest rate (as a percentage). For example, at a 6% interest rate, your investment will double in approximately 72 / 6 = 12 years. This is a rough estimate and assumes yearly compounding.

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