Compound Interest Calculator
Unlock the power of compound interest to see how your investments can grow over time. This calculator helps you visualize the future value of your savings and investments.
Investment Growth Chart
Year-by-Year Breakdown
| Year | Starting Balance | Contributions | Interest Earned | Ending Balance |
|---|
How Compound Interest Works
Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. It's often referred to as "interest on interest," and it's a powerful concept that can significantly boost your savings over time.
The more frequently interest is compounded (e.g., daily vs. annually), the faster your money grows, assuming all other factors remain constant. This calculator helps you see this effect in action.
Compound Interest Formula
Where:
- A = the future value of the investment/loan, including interest
- P = the principal investment amount (the initial deposit or loan amount)
- PMT = the monthly payment (monthly contribution)
- r = the annual interest rate (as a decimal)
- n = the number of times that interest is compounded per year
- t = the number of years the money is invested or borrowed for
Limitations
While the compound interest calculator provides valuable insights, it's important to consider its limitations:
- Inflation: The calculator doesn't account for inflation, which erodes the purchasing power of money over time.
- Taxes: Investment gains are often subject to taxes, which are not factored into these calculations.
- Fees: Investment accounts may have fees that can impact overall returns.
- Market Volatility: Assumes a constant interest rate, which is rarely the case in real-world investments.