Compound Interest Calculator
Calculate the future value of your investments with compound interest
Investment Calculator
Investment Results
Final Amount
Total Interest Earned
Total Contributions
Effective Annual Rate
Year-by-Year Breakdown
| Year | Balance | Interest Earned | Contributions |
|---|
Understanding Compound Interest
Compound Interest Formula
Where: A = Final Amount, P = Principal, r = Annual Rate, n = Compounding Frequency, t = Time, PMT = Monthly Payment
What is Compound Interest?
Compound interest is the addition of interest to the principal sum of a loan or deposit. It’s the result of reinvesting interest, rather than paying it out, so that interest in the next period is earned on the principal sum plus previously accumulated interest.
The Power of Time
Time is the most powerful factor in compound interest. The earlier you start investing, the more time your money has to grow. Even small amounts can become substantial over long periods due to the exponential nature of compound growth.
Interest Rate Impact
Small differences in interest rates can have huge impacts over time. A 1% difference in annual return can result in tens of thousands of dollars difference over a 30-year period. This is why it’s important to minimize fees and maximize returns.
Compounding Frequency
The more frequently interest is compounded, the more you earn. However, the difference between daily and monthly compounding is usually small for typical investment returns. Focus more on the annual rate than the compounding frequency.
Regular Contributions
Making regular contributions to your investment significantly accelerates wealth building. This strategy, called dollar-cost averaging, also helps reduce the impact of market volatility by spreading purchases over time.
Investment Tips
Start early, invest regularly, diversify your portfolio, and stay invested for the long term. Avoid trying to time the market, and focus on low-cost, broad-market index funds for consistent returns over time.