About This Tool
The compound interest calculator helps you see exactly how your money can grow over time when interest earns interest. Whether you're saving for retirement, a down payment, or just curious about the power of compounding, this tool shows the future value of an initial deposit with regular contributions. Common use cases include comparing savings accounts, estimating investment growth, and understanding how starting earlier can dramatically boost your returns. It's eye-opening to see how small monthly additions can turn into a substantial nest egg.
How It Works
This calculator uses the compound interest formula: A = P(1 + r/n)^(nt) + PMT * [((1 + r/n)^(nt) - 1) / (r/n)], where A is the future value, P is the principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, t is the number of years, and PMT is the periodic contribution. The formula accounts for both the initial lump sum and regular additions, compounding them over time.
Examples
- If you invest $10,000 at 7% annual interest compounded monthly for 20 years with no contributions, you'll end up with about $40,547.
- Starting with $5,000 and adding $200 per month at 8% compounded monthly for 25 years yields approximately $198,422.
Pro Tips
- Always use the annual interest rate as a decimal (e.g., 7% = 0.07) and match the compounding frequency to your account's actual schedule.
- Be realistic with your interest rate—use historical averages for stocks (7-10%) or current savings account rates (1-2%) to avoid overestimating.
- Include any fees or taxes in your calculation by reducing the effective interest rate accordingly.