Compound Interest Calculator

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What is Compound Interest?

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 the mechanism that makes your investments grow exponentially over time, as you earn interest on both your principal and on interest already earned.

The Compound Interest Formula

The basic compound interest formula for a one-time investment is:

$${ A = P(1 + r)^n}$$

$${ A = P(1 + \frac{r}{n})^{nt} }$$

Where:

  • A = final amount (including principal and interest)
  • P = principal (initial investment)
  • r = annual interest rate (in decimal form)
  • n = number of times interest is compounded per year
  • t = time in years

How to Use This Calculator

To calculate the future value of your investments using compound interest:

  1. Enter your initial investment amount
  2. Specify any additional regular contributions
  3. Select the contribution frequency (monthly, quarterly, or annually)
  4. Enter the annual interest rate (expected rate of return)
  5. Choose how frequently interest compounds and your time horizon

Important Considerations

When planning your investments, keep in mind:

  • The power of compound interest increases dramatically over longer time periods
  • Even small increases in interest rate can lead to significant differences in long-term results
  • Starting early, even with small amounts, can yield much better results than waiting and investing larger amounts later
  • Regular contributions can significantly boost your investment growth compared to a one-time investment