๐ Compound Interest Calculator
Calculate how your money grows with compound interest.
๐ What Is Compound Interest?
Compound interest is the process of earning "interest on interest." Each period, your returns are added to your principal, creating exponential growth.
Albert Einstein reportedly called compound interest "the eighth wonder of the world."
๐ The Formula
Where:
- A = Final amount
- P = Initial principal
- r = Annual interest rate (decimal, e.g. 8% = 0.08)
- n = Compounding periods per year (monthly = 12)
- t = Number of years
- PMT = Monthly contribution
๐ Example
You invest $10,000 initially, earn 8% annually, invest for 10 years, and contribute $1,000/month:
- Principal growth: $10,000 ร (1 + 0.08/12)120 โ $22,196
- Total contributed: $10,000 + ($1,000 ร 120) = $130,000
- Contributions growth: โ $182,946
- Final balance: โ $205,142
- Total earnings: โ $75,142
โฑ๏ธ Rule of 72: Quick Doubling Estimate
- At 6%: ~12 years to double
- At 8%: ~9 years to double
- At 10%: ~7.2 years to double
โ Frequently Asked Questions
What rate of return should I use?
For reference: US stock market (S&P 500) averages ~10% annually before inflation. A balanced 60/40 portfolio historically returns ~7-8%. For conservative planning, use 5-7%. For aggressive growth assumptions, use 8-10%.
Should I account for inflation?
Yes, for realistic planning. Subtract expected inflation (typically 2-3% in the US) from your rate. For example, if the S&P 500 returns 10% nominally, the real return is ~7% after inflation.
How powerful are monthly contributions?
Extremely. Investing just $500/month at 8% for 30 years grows to approximately $745,000 โ even though you only contributed $180,000. The remaining $565,000 is compound growth.
What's the difference between compound and simple interest?
Simple interest only pays on the original principal (linear growth). Compound interest pays on principal + accumulated interest (exponential growth). Over long periods, compound interest dramatically outperforms.
Can I use this for retirement planning?
Yes. Enter your current savings as the initial investment, your expected annual contributions as the monthly amount, and your planned years until retirement. This gives a reasonable estimate based on your assumed return rate.
Is my data safe?
Completely. All calculations happen in your browser using JavaScript. No data is ever sent to any server. No tracking, no cookies, no registration.