Compound Interest Calculator

Calculate how your investments grow over time with compound interest. See how regular contributions and different compounding frequencies affect your returns.

Initial Investment ($) The amount of money you initially invest

Annual Interest Rate (%) Expected annual rate of return

Time Period (years) How long you plan to invest

Compound Frequency

Regular Contribution ($) Amount you add regularly (optional)

Contribution Frequency

Quick Examples:

How to Use This Calculator

Enter your initial investment amount
Input the expected annual interest rate
Specify the time period in years
Select how often interest is compounded
Optionally add regular contributions and their frequency
Click Calculate to see how your investment will grow

Formula Used

A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]

Where:

A = Future value of the investment
P = Principal amount (initial investment)
r = Annual interest rate (decimal)
n = Number of times interest is compounded per year
t = Time the money is invested for, in years
PMT = Regular contribution amount

Example Calculation

Retirement Savings Scenario:

Calculate the future value of a retirement account with an initial investment of $10,000, monthly contributions of $500, an annual return of 7%, compounded monthly over 30 years.

Given:

Principal (P) = $10,000
Annual interest rate (r) = 7% or 0.07
Time period (t) = 30 years
Compound frequency (n) = 12 (monthly)
Monthly contribution (PMT) = $500

Calculation:

Future value = $10,000(1 + 0.07/12)^(12×30) + $500 × [((1 + 0.07/12)^(12×30) - 1) / (0.07/12)]
= $10,000(1 + 0.00583)^360 + $500 × [(1.00583^360 - 1) / 0.00583]
= $10,000(8.1165) + $500 × [(8.1165 - 1) / 0.00583]
= $81,165 + $500 × [7.1165 / 0.00583]
= $81,165 + $500 × 1,220.5
= $81,165 + $610,250
= $691,415

Result: After 30 years, the investment will be worth approximately $691,415, with $610,250 coming from contributions and $81,165 from the initial investment's growth.

Why This Calculation Matters

Practical Applications

Planning for retirement savings
Estimating college fund growth
Projecting investment returns
Understanding the power of compound interest

Key Benefits

Visualize long-term growth potential
Compare different investment scenarios
Motivate consistent saving habits
Make informed financial decisions

Common Mistakes & Tips

More frequent compounding results in higher returns. Daily compounding yields more than monthly, which yields more than quarterly. When comparing investment options, always consider the compounding frequency, not just the stated interest rate.

The nominal return doesn't account for inflation's purchasing power erosion. For long-term goals, consider using real returns (nominal return minus inflation rate) to get a more accurate picture of your future purchasing power.

Due to the exponential nature of compound interest, starting earlier has a dramatically larger impact than investing larger amounts later. Even small contributions made consistently over a long period can outperform larger contributions made later in life.

Frequently Asked Questions

Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and the accumulated interest from previous periods. This means compound interest grows at an accelerating rate, while simple interest grows at a constant rate.

The Rule of 72 is a shortcut to estimate how long an investment will take to double given a fixed annual rate of return. Simply divide 72 by the annual interest rate to get the approximate number of years. For example, at 6% interest, your money will double in about 12 years (72 ÷ 6 = 12).

Compound interest is beneficial when you're earning it (investments, savings accounts) but detrimental when you're paying it (credit cards, loans). When borrowing money, compound interest causes debt to grow faster, making it harder to pay off. This is why high-interest debt can quickly become unmanageable.

References & Disclaimer

Financial Disclaimer

This calculator provides estimates for educational purposes only. It does not account for taxes, fees, inflation, or market fluctuations. Actual investment returns may vary. Consult with a qualified financial advisor before making investment decisions.

References

SEC Compound Interest Calculator - Official calculator from the U.S. Securities and Exchange Commission
The Power of Compound Interest - Investopedia article explaining compound interest concepts
Understanding Compound Interest - Consumer Financial Protection Bureau resource

Accuracy Notice

This calculator assumes a fixed rate of return and regular contributions. In reality, investment returns fluctuate and may be negative in some periods. The calculator does not account for tax implications, inflation, or investment fees which can significantly impact actual returns.

About the Author

Kumaravel Madhavan

Web developer and data researcher creating accurate, easy-to-use calculators across health, finance, education, and construction and more. Works with subject-matter experts to ensure formulas meet trusted standards like WHO, NIH, and ISO.

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