Compound Interest Calculator

Compound Interest Calculation

This calculator helps you understand how your investments can grow over time with the power of compound interest. Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods.

How Compound Interest Works

Compound interest differs from simple interest in that it earns interest on both the principal amount and the accumulated interest. This creates a snowball effect where your money grows exponentially over time.

A = P × (1 + r/n)^(n×t)
Where:
A = Future value of investment
P = Principal investment amount
r = Annual interest rate (decimal)
n = Number of times interest is compounded per year
t = Time the money is invested for (in years)

The Power of Compounding

• Time is your greatest ally: The longer you stay invested, the more dramatic the compounding effect
• Regular contributions multiply growth: Adding money regularly significantly boosts your final amount
• Frequency matters: More frequent compounding (monthly vs yearly) yields better returns
• Small differences add up: A 1% higher return can make a huge difference over decades

Compound Interest Examples

Investment Strategies

• Start early: Even small amounts grow significantly over long periods
• Be consistent: Regular investments benefit more from compounding
• Reinvest dividends: Allows your returns to compound
• Increase contributions: Boost your investment as your income grows
• Stay invested: Avoid withdrawing to maximize compounding benefits