Compound Interest Calculator

About Compound Interest

The Compound Interest Calculator estimates the future value of your investment, factoring in initial investment, regular contributions, interest rate, and time horizon. It demonstrates how compound interest can significantly grow your wealth over time by earning interest on both the principal and accumulated interest.

How It’s Calculated

The future value (FV) is calculated using the compound interest formula: FV = PV(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)], where PV is the present value (initial investment), r is the annual interest rate, n is the compounding frequency per year, t is the time in years, and PMT is the periodic payment (monthly contribution). This formula accounts for both the growth of the initial investment and the contributions over time.

Key Insights

• •Compounding is most powerful over long periods, as interest earns interest, leading to exponential growth.
• •Regular contributions significantly boost the future value, even with modest interest rates.
• •Higher compounding frequencies (e.g., monthly vs. annually) result in greater returns due to more frequent interest calculations.
• •Starting early maximizes the benefits of compounding, even with smaller initial investments.