Compound Interest Calculator
Calculate how your investments grow over time with compound interest. See the power of monthly contributions and compound growth with a detailed year-by-year breakdown. Perfect for retirement planning, savings goals, and investment strategies.
How It Works
1. Enter Your Initial Investment
Start with your current savings or investment amount. This can be zero if you are starting from scratch with monthly contributions.
2. Set Monthly Contributions
Enter how much you plan to save or invest each month. Consistent monthly contributions significantly accelerate wealth building.
3. Choose Annual Return Rate
Enter your expected yearly growth rate. Historical stock market averages around 7-10%, while savings accounts may offer 1-5%.
4. View Year-by-Year Growth
See exactly how your money grows each year with a detailed breakdown of contributions, interest earned, and total balance.
Examples
Example 1: Starting Small with Monthly Savings
Initial Investment: $1,000 Monthly Contribution: $200 Annual Return: 7% Time Period: 10 years Results: Final Balance: $36,197.48 Total Contributions: $25,000 Total Interest Earned: $11,197.48 (44.8% gain) Even with modest monthly savings, compound interest generates significant returns over time!
Example 2: The Power of Time - 30 Years
Initial Investment: $5,000 Monthly Contribution: $500 Annual Return: 8% Time Period: 30 years Results: Final Balance: $745,179.51 Total Contributions: $185,000 Total Interest Earned: $560,179.51 (303% gain!) Your money more than triples through compound interest. Starting early makes a massive difference.
Example 3: Monthly vs Yearly Compounding
Initial Investment: $10,000 Monthly Contribution: $300 Annual Return: 6% Time Period: 20 years Monthly Compounding: $150,105.78 Yearly Compounding: $148,419.23 Difference: $1,686.55 Monthly compounding yields better returns because interest is calculated and added more frequently.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. In simple terms, it is "interest on interest" which makes your money grow exponentially over time. This is why Albert Einstein allegedly called it the eighth wonder of the world.
How does monthly contribution affect growth?
Monthly contributions dramatically accelerate wealth building because you are consistently adding new money that also earns compound interest. For example, saving $200/month at 7% return for 30 years results in $244,000, while a single $1,000 investment only grows to $7,612. Regular contributions are more powerful than timing the market.
What is a realistic annual return rate?
Historical average returns: Stock market (S&P 500) approximately 7-10% after inflation, Bonds 3-5%, High-yield savings accounts 1-5%, Real estate 8-12%. Remember, past performance does not guarantee future results. Use conservative estimates for planning.
Should I choose monthly or yearly compounding?
Monthly compounding results in slightly higher returns because interest is calculated and added to your principal more frequently. Most investment accounts compound daily or monthly. However, the difference between monthly and yearly compounding is small compared to the impact of your contribution amount and time horizon.
How can I maximize compound interest?
Start early - time is your greatest advantage. Contribute consistently - regular monthly additions accelerate growth significantly. Reinvest dividends and interest - let everything compound. Increase contributions when possible - even small increases make a big difference over time. Be patient - compound interest requires time to show exponential growth.