Compound Interest Calculator
Watch your money grow
Input Details
Growth Summary
The Power of Compound Interest
Albert Einstein reputedly called compound interest the "eighth wonder of the world." He who understands it, earns it; he who doesn't, pays it. Unlike simple interest, which is calculated only on the principal amount, compound interest is calculated on the principal plus the accumulated interest.
This compounding effect creates a snowball effect for your wealth. Over long periods, the interest you earn can eventually exceed the total amount you contributed yourself. This is why starting to invest early is the single most important financial decision you can make.
How to Use This Calculator
Enter your initial investment amount (Principal)
Input your expected annual interest rate
Select the number of years you plan to invest
Choose how often interest is compounded (e.g., Monthly, Annually)
Add any regular monthly contributions you plan to make
Review your projected total balance and total interest earned
Pro Tips
- •Start early: Time is the most powerful factor in compound interest
- •Contribute regularly: Even small monthly additions add up significantly
- •Reinvest dividends: Ensure all earnings are put back into the principal
- •Be consistent: Don't stop contributions during market dips
- •Check compounding frequency: Daily or monthly is better than annually
Compound Interest Formula (Annual)
A = P(1 + r/n)^(nt)Where:
A= Final amountP= Principal (initial investment)r= Annual interest rate (decimal)n= Number of times interest applied per time periodt= Number of time periods elapsed (years)Example:
P= $5,000r= 8% (0.08)n= 1 (Annually)t= 10 yearsCalculation:
A = 5000(1 + 0.08/1)^(1×10) = 5000(2.1589)Result: $10,794.62
Frequently Asked Questions
Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. Essentially, it's 'interest on interest,' which allows your money to grow exponentially over time compared to simple interest.