Compound Interest Calculator

What Is Compound Interest?

Compound interest is the process of earning interest on both your original principal and on previously accumulated interest. Unlike simple interest, which is calculated only on the initial amount, compound interest allows your money to grow exponentially over time.

How Does This Calculator Work?

Enter your initial investment, monthly contribution, expected annual return, and the number of years you plan to invest. The calculator shows your projected future value, total contributions, and total interest earned. The chart visualizes how contributions and interest stack up year by year.

The Compound Interest Formula

The future value of a lump sum is calculated as FV = PV × (1 + r/n)^(n×t), where PV is the present value, r is the annual interest rate, n is the compounding frequency, and t is the number of years. Monthly contributions are compounded separately and added to the total.

Why Compounding Frequency Matters

The more frequently interest compounds, the faster your investment grows. Monthly compounding produces a slightly higher return than quarterly or annual compounding because interest begins earning its own interest sooner.

Tips for Maximizing Compound Interest

• Start investing as early as possible to take advantage of long time horizons.
• Increase your monthly contributions whenever you get a raise or bonus.
• Choose investments that reinvest dividends and interest automatically.
• Avoid withdrawing from your investment accounts to let compounding work uninterrupted.
• Consider tax-advantaged accounts like 401(k)s and IRAs to keep more of your returns.