Compound Interest Calculator
Discover the magic of compound interest and see how your investments can grow exponentially over time. Calculate the impact of regular contributions and different compounding frequencies.
Compound Interest Calculator
💡 Quick Scenarios
Conservative: 4-6% (Bonds, CDs)
Moderate: 7-9% (Index Funds)
Aggressive: 10-12% (Growth Stocks)
Stock Market Avg: ~10% historical
Understanding Compound Interest
What is Compound Interest?
- Simple Interest: Interest earned only on principal
- Compound Interest: Interest earned on principal + previous interest
- The Magic: Your money grows exponentially over time
- Time Factor: Earlier you start, more you benefit
Key Factors
- Principal: Your initial investment amount
- Interest Rate: Annual percentage return
- Time: How long you invest (years)
- Compounding Frequency: How often interest compounds
- Regular Contributions: Adding money consistently
💡 The Rule of 72
Quick Formula: Divide 72 by your interest rate to see how long it takes to double your money.
Compounding Frequency Impact
📈 More Frequent = Better
- • Daily: Best compounding (365 times/year)
- • Monthly: Great for most investments
- • Quarterly: Common for savings accounts
- • Annually: Least frequent compounding
💰 Regular Contributions Power
- • Dollar-Cost Averaging: Reduces market risk
- • Compound on Contributions: New money earns interest too
- • Habit Building: Consistent investing discipline
- • Exponential Growth: Dramatically increases final amount
🎯 Investment Strategies
- • Start investing as early as possible
- • Automate regular contributions
- • Choose tax-advantaged accounts (401k, IRA)
- • Reinvest all dividends and gains
- • Diversify your investment portfolio
- • Don't try to time the market
- • Stay invested for the long term
- • Review and adjust annually
Real-World Examples
Early Bird vs. Late Starter
Early Bird: Invests $200/month from age 25-35 (10 years), then stops.Late Starter: Invests $200/month from age 35-65 (30 years). At 7% annual return, the Early Bird ends up with more money despite investing for fewer years!
The Power of One Extra Percent
On a $10,000 investment over 30 years: 6% return = $57,435, but 7% return = $76,123. That single percentage point difference creates $18,688 in extra wealth!