Compound Interest Calculator
See how your investments can grow with the power of compound interest.
What is Compound Interest?
Compound interest is the interest you earn on both your original money (the principal) and the interest you've already earned. It's often called "interest on interest" and can make a sum grow at a faster rate than simple interest, which is calculated only on the principal amount.
This "snowball" effect is the magic of compounding and is one of the most powerful forces in finance.
The Key Factors of Growth
Several variables determine how quickly your investments will grow:
- Principal: The initial amount of money you start with. A larger principal gives you a bigger base to earn interest on from day one.
- Contributions: Regular additions to your principal. Consistent contributions can dramatically increase your future value, often more than the initial principal itself.
- Interest Rate: The rate at which your investment grows. Higher rates lead to faster growth.
- Time: The most powerful factor. The longer your money is invested, the more time it has to compound and grow exponentially. Starting early is key!
The Compound Interest Formula
For an initial principal with no additional contributions, the formula is:
- A = the future value of the investment
- P = the principal investment amount
- r = the annual interest rate (in decimal form)
- n = the number of times that interest is compounded per year
- t = the number of years the money is invested for
Our calculator also includes the formula for the future value of a series of regular contributions to give you a complete picture of your investment's potential.
For a more in-depth guide, read our detailed article on this topic.