This Compound Interest Calculator helps you estimate how much your money can earn when interest is added on top of interest. Simply enter your initial amount, interest rate, time period, and compounding frequency, and watch your wealth grow! Perfect for planning savings, investments, or understanding the power of compound interest.
Compound Interest Calculator
See how your money can grow with the power of compound interest
Results
Yearly Growth Projection
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Understanding Compound Interest: How Your Money Can Grow
Compound interest is one of the most powerful concepts in personal finance. It’s the idea that you earn interest not just on the money you put in, but also on the interest your money has already earned. Over time, this “interest on interest” can make your savings or investments grow much faster.
What Is Compound Interest?
Compound interest is the interest calculated on the initial principal and also on the accumulated interest from previous periods. Unlike simple interest, which only applies to your starting amount, compound interest keeps adding up, helping your money grow exponentially.
Example:
- You deposit $1,000 in a savings account with a 5% annual interest rate, compounded yearly.
- After 1 year: $1,000 × 5% = $50 → total $1,050
- After 2 years: $1,050 × 5% = $52.50 → total $1,102.50
- Your money grows faster because the interest from year 1 also earns interest in year 2.
Key Terms to Know
- Principal – The original amount of money you invest or save.
- Interest Rate – The percentage your money earns over a period (usually per year).
- Compounding Frequency – How often the interest is added to your account. Common types include:
- Annually – once a year
- Semi-annually – twice a year
- Quarterly – four times a year
- Monthly – twelve times a year
- Daily – every day
- Time – How long your money is invested or saved. The longer it stays, the more it compounds.
- Future Value (FV) – The total amount of money you will have after compounding.
Why Compound Interest Is Powerful
- Long-term growth: The longer you leave your money, the bigger the effect.
- Reinvesting pays off: Even small contributions regularly can grow significantly.
- Inflation advantage: Compounding can help your money grow faster than inflation if invested wisely.
Fun Fact: Albert Einstein reportedly called compound interest the “eighth wonder of the world” because of how it makes money grow over time.
Tips to Make Compound Interest Work for You
- Start early: Even small amounts grow a lot over time.
- Be consistent: Regular contributions add up.
- Choose higher compounding frequency: Monthly or daily compounding grows faster than annual.
- Reinvest earnings: Don’t withdraw interest if you can help it.
