Free Compound Interest Calculator
Calculate how your investments will grow over time with the power of compound interest. See the impact of regular contributions, different compounding frequencies, and adjust for inflation to plan your financial future.
Investment Details
The amount you start with initially
Expected annual return on your investment
How long you plan to keep your investment
How often interest is calculated and added to your principal
Additional Contributions
Regular deposits increase your investment growth significantly
More frequent contributions can lead to better growth
See how inflation affects your investment's real value over time
Your Investment Growth Results
Growth Over Time
Principal vs. Interest
The Power of Compound Interest
Compound interest is often called the "eighth wonder of the world" because it allows your money to grow exponentially over time. The earlier you start investing and the longer you let your money grow, the more dramatic the results will be.
Quick Tips to Maximize Your Returns
- Start early - even small amounts can grow significantly over time
- Contribute regularly - consistent additions boost your investment growth
- Reinvest dividends and interest to take full advantage of compounding
- Consider tax-advantaged accounts like IRAs or 401(k)s for retirement savings
How to Use Our Free Compound Interest Calculator
1. Enter Your Initial Investment
Start by entering the amount of your initial investment or deposit. This is the principal amount that will begin earning interest immediately.
2. Set Your Interest Rate
Enter the annual interest rate you expect to earn on your investment. This can be based on historical returns for your investment type or projected rates from your financial institution.
3. Choose Time Period and Compounding Frequency
Specify how long you plan to keep your investment (in years) and how often the interest will compound (daily, weekly, monthly, quarterly, semi-annually, or annually).
4. Add Regular Contributions
Enter how much extra you'll contribute and how often you'll make these contributions. Regular deposits can significantly boost your investment growth over time.
5. Account for Inflation (Optional)
Check the "Account for Inflation" box to see how inflation might affect the real value of your investment over time. You can adjust the inflation rate based on current economic conditions or historical averages.
6. Analyze the Results
The calculator will instantly show your future value, total interest earned, and return on investment. You can also view the growth chart to see how your investment increases over time, and the breakdown of principal versus interest.
Understanding Compound Interest
What is Compound Interest?
Compound interest is often described as "interest on interest" - it's the result of reinvesting interest rather than paying it out, so that interest in the next period is earned on the principal sum plus previously accumulated interest.
This powerful concept is what allows investments to grow exponentially over time. Albert Einstein reportedly called compound interest "the eighth wonder of the world," saying, "He who understands it, earns it; he who doesn't, pays it."
The Power of Compound Interest
The true power of compound interest becomes apparent over longer time periods. The longer you leave your money invested, the more dramatic the growth becomes. This is why starting to save and invest early is so important for long-term financial goals like retirement.
For example, if you invest $10,000 at a 7% annual return:
- After 10 years, you'll have about $19,672
- After 20 years, you'll have about $38,697
- After 30 years, you'll have about $76,123
Notice how the growth accelerates over time - that's compound interest at work!
How Regular Contributions Boost Your Returns
Adding regular contributions to your investment can dramatically increase your returns. For example, if you start with $10,000 and add just $100 per month at a 7% annual return:
- After 10 years, you'll have about $46,435
- After 20 years, you'll have about $118,121
- After 30 years, you'll have about $243,994
That's the power of combining compound interest with regular contributions!
Factors Affecting Compound Interest
- Principal Amount - The initial investment or deposit amount.
- Interest Rate - The annual percentage rate at which your investment grows.
- Time Period - The length of time your money is invested.
- Compounding Frequency - How often interest is calculated and added to your principal (daily, monthly, quarterly, annually, etc.).
- Regular Contributions - Additional deposits made to the investment over time.
The Rule of 72
A quick way to estimate how long it will take for your investment to double is to use the "Rule of 72." Simply divide 72 by your annual interest rate to get the approximate number of years.
For example, at a 6% annual interest rate, your investment will double in approximately 72 ÷ 6 = 12 years.
Compound Interest vs. Simple Interest
Unlike compound interest, simple interest is calculated only on the initial principal. With simple interest, the interest payment remains the same throughout the investment period.
For example, $10,000 invested for 10 years at 5% simple interest would earn $500 per year, for a total of $5,000 in interest. The same investment with compound interest would earn approximately $6,289 - over 25% more!
The Impact of Inflation
When planning long-term investments, it's important to consider inflation, which erodes the purchasing power of money over time. Our calculator includes an option to adjust for inflation, showing you the "real" future value of your investment in today's dollars.
For example, if your investment grows at 7% annually but inflation is 2%, your real growth rate is about 5%. This means that while your account balance is growing at 7%, the actual purchasing power of your investment is only increasing by about 5% per year.
Frequently Asked Questions
What investments use compound interest?
Many investment vehicles benefit from compound interest, including savings accounts, certificates of deposit (CDs), bonds, dividend-paying stocks, mutual funds, ETFs, and retirement accounts like 401(k)s and IRAs. Any investment where earnings are reinvested rather than withdrawn will experience compound growth over time.
How much should I save each month?
Financial experts often recommend saving at least 15-20% of your income for retirement and other long-term goals. However, the right amount depends on your age, financial goals, and current financial situation. Even small regular contributions can grow significantly over time thanks to compound interest. Use our calculator to experiment with different contribution amounts and see their impact on your future wealth.
When should I start investing?
The best time to start investing is as early as possible. Due to the power of compound interest, even small amounts invested early in life can grow to substantial sums over time. For example, $5,000 invested at age 25 with a 7% annual return would grow to about $74,872 by age 65. The same $5,000 invested at age 35 would only grow to about $38,061 by age 65.
What is a good interest rate for savings?
Interest rates vary based on economic conditions and the type of investment. For savings accounts, rates typically range from 0.01% to 2% or more for high-yield accounts. For investments like stocks and bonds, average annual returns might be 7-10% for stocks (over the long term) and 3-5% for bonds. Remember that higher returns usually come with higher risk, and past performance doesn't guarantee future results.
How can I maximize my compound interest?
To maximize compound interest: 1) Start early to give your money more time to grow, 2) Contribute regularly to increase your principal, 3) Reinvest all earnings rather than withdrawing them, 4) Seek investments with higher returns (considering your risk tolerance), 5) Choose investments with more frequent compounding periods, and 6) Minimize fees and taxes that can reduce your effective returns.