Compound Interest Calculator
Calculate how your investments can grow over time with compound interest
What is Compound Interest?
Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It’s often called “interest on interest” and can make your money grow faster compared to simple interest, which is calculated only on the principal amount.
How to Use This Compound Interest Calculator
- Enter your initial investment – The amount you’re starting with
- Add monthly contributions – Regular investments can significantly boost growth
- Set the interest rate – The expected annual return on your investment
- Choose compounding frequency – How often interest is added to your balance
- Set investment period – The number of years you plan to invest
- Adjust for inflation/taxes – For more realistic projections
- Calculate – See detailed projections of your investment growth
The Power of Compound Interest
Time is Your Greatest Ally
The longer your money compounds, the more dramatic the growth. Starting early can make a huge difference, even with smaller contributions.
Regular Contributions Multiply Growth
Adding even small amounts regularly can significantly increase your final balance due to compounding effects.
Compounding Frequency Matters
More frequent compounding (monthly vs. annually) leads to greater growth, as interest earns interest more often.
Compound Interest Formula
The formula for compound interest is:
Where:
- A = the future value of the investment
- P = the principal investment amount
- r = the annual interest rate (decimal)
- n = number of times interest is compounded per year
- t = the time the money is invested for in years
Real-World Examples
| Scenario | Initial Investment | Monthly Contribution | Rate | Years | Final Value |
|---|---|---|---|---|---|
| Conservative Growth | $5,000 | $200 | 4% | 30 | $148,000 |
| Moderate Growth | $10,000 | $500 | 6% | 20 | $245,000 |
| Aggressive Growth | $2,000 | $1,000 | 8% | 40 | $3,450,000 |
Tips for Maximizing Compound Growth
Start Early
Even small amounts invested early can outperform larger amounts invested later due to compounding.
Be Consistent
Regular contributions, even during market downturns, can significantly boost your final balance.
Reinvest Dividends
Automatically reinvesting dividends allows you to benefit from compounding on your entire investment.
Minimize Fees
High fees can significantly erode your returns over time. Look for low-cost investment options.