Compound Interest Calculator
Calculate how your money grows with compound interest, regular contributions, and withdrawals over time.
The Power of Compound Interest
Compound interest is often called the eighth wonder of the world. Unlike simple interest, which only grows based on your original principal, compound interest earns returns on your returns. Over time, this snowball effect can turn modest savings into significant wealth.
The key variables are your starting amount, how much you add regularly, the interest rate, and time. Even small regular contributions can make a huge difference over decades thanks to compounding.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. When you earn interest on your interest, your money grows exponentially rather than linearly. This is why starting early matters so much for long-term investing.
What are the three types of compounding?
The three main types are annual compounding (once per year), monthly compounding (12 times per year), and daily compounding (365 times per year). More frequent compounding means your interest earns interest sooner, resulting in slightly higher returns over the same period.
How do I calculate compound interest?
The basic formula is A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding periods per year, and t is time in years. For regular contributions, you add the future value of an annuity. This calculator handles all that math automatically.