Compound Interest Calculator

Calculate the final amount of your investment with compound interest, periodic contributions, and percentage return.

How the Compound Interest Calculator Works

This tool calculates the growth of your investment using the compound interest formula, considering initial capital, periodic contributions, rate of return, and duration.

The Compound Interest Formula

FV = PV x (1 + r/n)^(nt) + PMT x (((1 + r/n)^(nt) - 1) / (r/n))

Where: FV = future value, PV = initial capital, r = annual rate, n = compounding periods per year, t = duration in years, PMT = periodic contribution.

Why Compound Interest Is So Powerful

Compound interest creates an exponential effect: each period, earned interest is reinvested and produces new interest in turn. This mechanism, known as compounding, is the fundamental principle behind long-term investment growth.

A concrete example: investing $10,000 at 7% annually for 30 years, without additional contributions, the final amount would be about $76,123. With simple interest, it would have been only $31,000.

The Importance of Time and Consistency

The most determining factor in compound interest is time. Starting to invest $200/month at age 25, at 7% annually, leads to about $525,000 at age 65. Starting at 35, with the same parameters, leads to about $243,000 -- less than half.

Frequently Asked Questions

What is compound interest?▼

Compound interest is interest calculated not only on the initial capital but also on previously earned interest. This "snowball" effect grows the investment exponentially over time. Albert Einstein reportedly called it "the eighth wonder of the world."

What is the difference between simple and compound interest?▼

With simple interest, the return is calculated only on the initial capital. With compound interest, each period the return is recalculated on the capital plus previous interest. On $10,000 at 5% over 20 years: simple = $20,000, compound = $26,533.

How does the Rule of 72 work?▼

The Rule of 72 is a quick approximation: divide 72 by the interest rate to get the number of years needed to double the capital. At 6% annually, it takes about 72/6 = 12 years to double.