Calculator Inputs
Adjust the values to see your savings grow.
Total Savings
Estimated growth visualization
Ready to Calculate
Adjust your inputs and click Update Projection to visualize your savings.
Formula & Methodology
To provide the most accurate projections, this calculator uses the Effective Annual Rate (EAR). This method normalizes the interest rate to account for compounding frequency, ensuring that your investment's true growth potential is reflected regardless of how often you contribute.
1. Effective Annual Rate (EAR)
Calculates the true annual return by accounting for compounding frequency.
r = nominal annual rate, n = compounds per year
2. Future Value of Initial Deposit
Determines how much your starting principal grows over time.
P = initial principal, t = time in years
3. Future Value of Contributions
First, we convert the EAR back to a rate that matches your contribution frequency (e.g., monthly).
Periodic Rate
Future Value of Annuity
p = periods per year, PMT = contribution amount
4. Total Future Value
Compound Interest Guide Guide
How to Use
- 1Enter your **Initial Investment** (Principal Amount).
- 2Input your **Monthly Contribution** if you plan to add money regularly.
- 3Set the **Interest Rate** (Annual Percentage Rate) you expect to earn.
- 4Choose the **Time Period** in years for your investment to grow.
- 5Select the **Compounding Frequency** (e.g., Annually, Monthly) to see how often interest is calculated.
Formula & Logic
Compound interest is the concept of earning interest on interest. Unlike simple interest, where you only earn on your initial deposit, compound interest allows your wealth to grow exponentially because the interest you earn in one period starts earning its own interest in the next period.
Practical Applications
Retirement Planning
Estimate how much your retirement savings will grow over 20-30 years with regular contributions.
Savings Goals
Determine how much you need to save monthly to reach a specific financial goal like a house down payment.
Investment Comparison
Compare different investment vehicles by adjusting the interest rate to see the long-term impact of even a 1% difference.
Frequently Asked Questions
Q.What is the difference between simple and compound interest?
Simple interest is calculated only on the principal portion of a loan or deposit. Compound interest is calculated on the principal AND the accumulated interest of previous periods, leading to faster growth.
Q.How does the frequency of compounding affect my return?
The more frequently interest is compounded (e.g., monthly vs. annually), the higher your returns will be, because your interest starts earning interest sooner.
Q.What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your investment at a fixed annual rate of return. You divide 72 by the annual rate of return.