Compound Interest Calculator
Compound Interest Calculator
Compound interest is the interest on both the initial principal and the accumulated interest from previous periods. Albert Einstein reportedly called it the "eighth wonder of the world."
Key Terms
- Principal — The initial amount invested or deposited.
- Interest Rate — The annual rate of return on your investment.
- Compound Frequency — How often interest is calculated and added to the balance (daily, monthly, quarterly, annually).
- Future Value — The total amount after compound growth over the investment period.
- Time Period — The length of time the money remains invested.
Compound Interest Formula
A = P(1 + r/n)^(nt)
Where:
- A = Future value of the investment
- P = Principal investment amount
- r = Annual interest rate (in decimal)
- n = Number of times interest compounds per year
- t = Number of years the money is invested
Compound Frequencies
- Annually (1x) — Interest calculated once per year
- Quarterly (4x) — Interest calculated every 3 months
- Monthly (12x) — Interest calculated every month
- Daily (365x) — Interest calculated every day
Tips for Investors
- Start investing early — time is the most powerful factor in compounding.
- More frequent compounding yields higher returns over time.
- Regular contributions significantly increase your final balance.
- Higher rates dramatically impact long-term growth due to compounding.
- Even small differences in interest rates compound significantly over decades.