Compound Interest Calculator
See how your investments grow when you earn interest on your interest. The longer you wait, the more dramatic the results.
Investment Details
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Compound Interest Summary
Future Value
$0
Total growth over 10 years
Total Interest
$0
Earnings from compound interest
Total Contributions
$0
Principal + monthly deposits
Growth Projection
Understanding Compound Interest
Compound interest is often called the "eighth wonder of the world" because of its ability to grow wealth exponentially over time. Unlike simple interest, which only earns interest on the principal, compound interest earns interest on both the principal and the accumulated interest.
The Power of Compounding
Compound interest is what makes investments grow significantly over longer time periods. The longer you keep your money invested, the more powerful the compounding effect becomes.
Real-World Example
If you invest $10,000 at a 7% annual return:
- After 10 years: $19,672
- After 20 years: $38,697
- After 30 years: $76,123
Key Benefits
- Exponential growth of your investments
- Faster wealth accumulation over time
- Benefit from both principal and interest growth
- Ideal for long-term investment strategies
- Helps beat inflation over time
Advanced Concepts
The Rule of 72
A quick way to estimate how long it takes for your investment to double:
72 ÷ Annual Interest Rate = Years to Double
Example: At 7% interest, your money doubles every ~10.3 years.
Compounding Frequency
The more frequently interest is compounded, the faster your money grows:
- Annual: Interest calculated once per year
- Monthly: Interest calculated 12 times per year
- Daily: Interest calculated 365 times per year
Maximizing Compound Interest
Start early: Time is your biggest advantage with compound interest. Starting at 25 instead of 35 can more than double your retirement savings, even with the same monthly contributions. Open that account now, not later.
Automate it: Set up automatic transfers on payday so you're investing consistently without thinking about it. Consistent contributions massively boost compounding over time.
Use tax-advantaged accounts: 401(k)s, IRAs, and HSAs let your money grow without taxes eating into it every year. At minimum, contribute enough to get your full employer match—that's free money.
Keep fees low: Choose low-cost index funds with expense ratios under 0.2%. A 1% difference in fees can cost you $30,000+ over 20 years on a $100,000 investment because of compounding.
Don't touch it: Early withdrawals kill compound growth. Build a separate emergency fund so you're not tempted to tap into your investments when unexpected expenses hit.
Common Mistakes to Avoid
Investment Pitfalls
- Not starting early enough
- Withdrawing too frequently
- Chasing high-risk investments
- Ignoring fees and expenses
- Trying to time the market
Best Practices
- Start investing as early as possible
- Stay consistent with contributions
- Keep fees low
- Stay invested for the long term
- Diversify your investments
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