Compound Interest Calculator
See the power of compounding with customizable investment scenarios.
Introduction to the Compound Interest Calculator
A Compound Interest Calculator helps you compute the interest earned on an investment or loan, where the interest itself earns interest. It considers the principal amount, interest rate, time, and contributions. This tool visually demonstrates your investment’s growth by compounding interest periodically, offering a clear financial projection.
Calculator and Results
Understanding Compound Interest
How to Use the Calculator
Follow these simple steps to project your investment growth:
- Enter Initial Investment: The lump sum you’re starting with.
- Set Annual Interest Rate: Your expected annual return (e.g., 8% for market average).
- Choose Investment Period: The number of years you plan to invest.
- Select Compounding Frequency: How often interest is calculated. More frequent compounding yields better results.
- Add Contribution Details: If you plan to make regular investments, enter the amount and frequency.
- Adjust Advanced Settings: Include inflation and taxes for more realistic projections.
- Click “Calculate”: Review your results in the summary, table, or metrics tabs.
The Formula Explained
The formula for compound interest with regular contributions is:
Where:
- A = Final amount
- P = Principal (initial investment)
- r = Annual interest rate (decimal)
- n = Compounding periods per year
- t = Time in years
- PMT = Regular payment amount
Frequently Asked Questions
Compound interest is calculated on the initial principal and the accumulated interest from previous periods. Simple interest is calculated only on the principal. This means compound interest grows your money exponentially, not linearly.
The calculator provides mathematically accurate projections based on your inputs. However, real-world returns are not guaranteed and can fluctuate. Use this tool for planning and estimation, not as a precise prediction.
Many investments benefit from compounding, including savings accounts, bonds (when interest is reinvested), and dividend-paying stocks, mutual funds, and ETFs (when dividends/distributions are reinvested).