Compound Interest Calculator
Calculate the future value of your investments with compound interest and regular contributions.
Compound Interest Calculator
See how your money grows with compound interest over time
Understanding Compound Interest
The power of earning returns on your returns
What is Compound Interest?
Compound interest is interest calculated on the initial principal and on the accumulated interest from previous periods. This means you earn returns not only on your original investment but also on all the interest you've earned over time.
The Rule of 72
A quick way to estimate how long it takes for your investment to double: divide 72 by the annual interest rate. For example, at 8% annual return, your money doubles in approximately 72 ÷ 8 = 9 years.
Compound Interest Formula
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]
A = Final amount
P = Principal (initial investment)
r = Annual interest rate
n = Number of times interest compounds per year
t = Time in years
PMT = Regular payment amount
Simple vs. Compound Interest
See the difference compound interest makes over time
| Years | Simple Interest (7%) | Compound Interest (7%) | Difference |
|---|---|---|---|
| 5 | $13,500.00 | $14,025.52 | +$525.52 |
| 10 | $17,000.00 | $19,671.51 | +$2,671.51 |
| 15 | $20,500.00 | $27,590.32 | +$7,090.32 |
| 20 | $24,000.00 | $38,696.84 | +$14,696.84 |
| 25 | $27,500.00 | $54,274.33 | +$26,774.33 |
| 30 | $31,000.00 | $76,122.55 | +$45,122.55 |
*Based on $10,000 initial investment with no additional contributions
Maximizing Compound Interest
Start Early
Time is your greatest asset. Starting to invest even small amounts in your 20s can result in significantly more wealth than starting later with larger amounts.
Regular Contributions
Consistent monthly investments, even small ones, can dramatically increase your final balance through dollar-cost averaging.
Higher Returns
Even small differences in return rates compound significantly over time. A 1% difference can mean tens of thousands more in retirement.
Reinvest Dividends
Automatically reinvesting dividends and capital gains maximizes the compounding effect of your investments.
Frequently Asked Questions
How often should interest be compounded?
More frequent compounding is better. Daily compounding is slightly better than monthly, which is better than annual. However, the difference between monthly and daily compounding is minimal for most investments.
What's a realistic annual return rate?
The stock market has historically averaged about 10% annually, but this includes volatile ups and downs. For conservative planning, many use 6-8%. Bonds typically return 3-5%, while savings accounts currently offer 0.5-5%.
Should I pay off debt or invest?
Generally, pay off high-interest debt (credit cards, personal loans) before investing. For low-interest debt like mortgages, you might invest while paying the minimum, especially if you expect higher returns than the debt interest rate.
How much should I contribute monthly?
A common rule is to save at least 10-15% of your income for retirement. Start with whatever you can afford, even $25-50/month makes a difference over time, and increase contributions as your income grows.