Compound Interest Calculator
See how your money can grow over time with the power of compound interest.
Initial Investment
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Additional Contribution
Enter how much you plan to add regularly.
Interest Rate
Enter the annual interest rate for your investment.
Compound Frequency
Choose how often interest is compounded.
Time Span
Select how long you plan to invest.
Understanding Compound Interest
What is Compound Interest?
Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. It's often described as "interest on interest," and it's the reason why saving and investing early can lead to significant growth over time.
The Compound Interest Formula
The formula for calculating compound interest is:
Where:
- A = Final amount
- P = Principal (initial investment)
- r = Annual interest rate (decimal)
- n = Number of times interest is compounded per year
- t = Time in years
The Rule of 72
The Rule of 72 is a simple way to determine how long it will take for an investment to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, you can get a rough estimate of how many years it will take for the initial investment to double.
For example, if you have an investment that earns 8% per year, it will take approximately 9 years (72 ÷ 8 = 9) to double your money.
The Impact of Compounding Frequency
The more frequently interest is compounded, the more your money will grow. For example, money compounded monthly will grow more than money compounded annually, even with the same annual interest rate.
The Power of Time
One of the most important factors in compound interest is time. The longer your money has to grow, the more dramatic the effects of compounding become. This is why starting to save and invest early is so important.