📈 Compound Interest Calculator
See how your money grows with compound interest. Add monthly contributions and compare compounding frequencies.
📊 Year-by-Year Breakdown
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📖 The Power of Compound Interest
Compound interest is often called the "eighth wonder of the world." Unlike simple interest (calculated only on the principal), compound interest earns interest on both the principal AND previously accumulated interest. This creates exponential growth over time.
The formula is: A = P(1 + r/n)^(nt) + PMT × [(1 + r/n)^(nt) - 1] / (r/n), where P is the principal, r is the annual rate, n is compounding frequency, t is time in years, and PMT is the periodic contribution.
For example, $10,000 invested at 7% annual return for 30 years grows to $76,123 with no additional contributions. Add $500/month and it becomes $680,191. That's the power of consistent investing combined with compound growth.
❓ Frequently Asked Questions
Yes, but less than you might think. More frequent compounding (daily vs. annually) produces slightly higher returns. For example, $10,000 at 7% for 20 years: annually = $38,697, monthly = $40,387, daily = $40,552. The difference between monthly and daily is minimal.
The S&P 500 has averaged about 10% annually before inflation (7% after inflation) since 1928. Conservative bonds average 3-5%. High-yield savings accounts currently offer 4-5%. Use 7% as a reasonable long-term estimate for diversified stock investments.
📖 What Is Compound Interest?
Compound interest is "interest on interest" — it calculates returns not only on your initial investment but also on accumulated interest from previous periods. Albert Einstein reportedly called it "the eighth wonder of the world." Understanding compound interest is fundamental to investing, retirement planning, and wealth building.
Our calculator visualizes how your investment grows over time with interactive charts. Compare different scenarios by adjusting contribution amounts, rates, and compounding frequencies.
🚀 How to Use This Tool
- Enter your initial investment (principal)
- Set the expected annual interest/return rate
- Choose compounding frequency and investment period
- Optionally add regular monthly contributions
💡 Tips & Best Practices
Investment Tip: Start investing early — time is the most powerful factor in compound growth. $200/month invested at 7% annual return grows to ~$500,000 in 30 years, with only $72,000 of that being your contributions.