⚠️ Important: Financial figures generated here are for planning purposes. Actual results may vary based on market conditions and individual circumstances.
What is Compound Interest Calculator: The Power of Growth?
Compound Interest is the principle where you earn interest not only on your initial principal but also on the accumulated interest from previous periods. Einstein reportedly called it the 'eighth wonder of the world'. This calculator models that exponential growth curve.
How it Works
Uses the standard compound interest formula extended for regular contributions:
$ A = P(1 + \frac{r}{n})^{nt} + PMT \frac{(1 + \frac{r}{n})^{nt} - 1}{\frac{r}{n}} $
Where P is Principal, r is rate, n is compounding frequency, t is time, and PMT is monthly deposit.
Step-by-Step Guide
- Principal – Starting amount.
- Contribution – Monthly addition.
- Rate & Time – Annual return % and Years.
- Project – See the exponential curve.
Example
Input: $5k Start, $200/mo, 7%, 10 Years
Result: $43,456 Future Value
FAQ
What frequency is used?
This tool assumes monthly compounding, standard for most savings and investment accounts.
Is 7% realistic?
7-10% is the historical average return of the S&P 500 (before inflation).
Does this include tax?
No, this is gross growth. Use the 'After-Tax Return' calculator for net figures.
Can I lose money?
All investments carry risk. This models theoretical growth based on a fixed rate.
Why is the curve curved?
Because interest earns interest, accelerating growth velocity over time.
Conclusion
The greatest factor in compounding is Time, not just the Rate. Starting 5 years earlier can double your result due to the exponential nature of the curve. Use this tool to see why 'investing early and often' is the golden rule of wealth.