Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (which only earns on the principal), compound interest grows exponentially over time, making it a powerful tool for building wealth.

More frequent compounding means interest is calculated and added to your balance more often, resulting in slightly higher returns. Daily compounding earns more than monthly, which earns more than quarterly, which earns more than yearly. However, the differences are usually small at typical interest rates.

The basic formula is A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate (decimal), n is the number of compounding periods per year, and t is the time in years. This calculator also factors in regular monthly contributions.

Regular monthly contributions significantly boost your final balance because each contribution also earns compound interest. Even small monthly additions can lead to substantial growth over long time periods due to the compounding effect on every contribution.

It depends on your investment type. High-yield savings accounts typically offer 4-5% APY, bonds around 3-6%, and the stock market has historically averaged about 7-10% annually (before inflation). Use a conservative estimate for financial planning.