Finance
Compound Interest Calculator
Calculate compound interest with regular contributions over time.
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What is Compound Interest Calculator?
A compound interest calculator shows how your money grows when interest is earned on both the initial principal and previously accumulated interest. This exponential growth effect is the foundation of long-term investing, savings, and debt management.
How to Use
- Enter your initial investment (principal) amount
- Set the annual interest rate and compounding frequency
- Add any regular monthly or annual contributions
- View the projected growth over your chosen time period
Formula
A = P(1 + r/n)^(nt) + PMT x [((1 + r/n)^(nt) - 1) / (r/n)]
Frequently Asked Questions
- What is the difference between simple and compound interest?
- Simple interest is calculated only on the principal. Compound interest is calculated on the principal plus accumulated interest, leading to exponential growth over time.
- How often should interest compound for the best returns?
- More frequent compounding yields slightly higher returns. Daily compounding beats monthly, which beats annually. However, the difference becomes marginal beyond daily.
- What is the Rule of 72?
- Divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 8% interest, your investment doubles in approximately 9 years.