Compound Interest Calculator
Calculate how your investments will grow over time with compound interest.
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Total Contributions
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Total Interest
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Final Balance
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Year-by-Year Breakdown
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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 essentially "interest on interest," which can cause your wealth to grow exponentially over time.
The Compound Interest Formula
The formula for compound interest is:
A = P(1 + r/n)^(nt)
Where:
- A = Final amount
- P = Principal (initial investment)
- r = Annual interest rate (decimal)
- n = Number of times interest is compounded per year
- t = Time (in years)
Why Compound Interest Matters
Compound interest is often called the "eighth wonder of the world" because of its powerful effect on wealth accumulation. The earlier you start investing, the more time your money has to grow exponentially.
Tips for Maximizing Compound Interest
- Start early: The sooner you begin, the more time your money has to grow.
- Invest regularly: Adding to your investments consistently can significantly increase your returns.
- Reinvest dividends: Automatically reinvesting dividends can accelerate your compound growth.
- Be patient: Compound interest works best over long time periods.