Compound Interest Calculator
See how your money grows over time with the power of compound interest. Calculate the future value of your investment with regular contributions.
How Is This Calculated?
Compound interest is calculated using the formula: A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)] Where: • A = Final amount • P = Initial principal • r = Annual interest rate (decimal) • n = Number of times interest is compounded per year (12 for monthly) • t = Number of years • PMT = Monthly contribution The key insight is that you earn interest on your interest — making your money grow exponentially over time. This is why starting early is so powerful.
Frequently Asked Questions
What is compound interest?
Compound interest is interest earned on both your initial investment (principal) and previously accumulated interest. Unlike simple interest, which only earns on the principal, compound interest accelerates growth over time.
How often is interest compounded?
Interest can be compounded daily, monthly, quarterly, or annually. More frequent compounding results in slightly more growth. This calculator uses monthly compounding, which is the most common for savings and investment accounts.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual rate of return. For example, at 7% return, your money doubles in approximately 72 ÷ 7 = 10.3 years.
Is 7% a realistic annual return?
The S&P 500 has historically returned about 10% per year before inflation, or about 7% after inflation. However, past performance doesn't guarantee future results, and actual returns vary significantly year to year.