Compound Interest Calculator with Projections
Discover how your investments can grow over time with the power of compound interest
Compound Interest Calculator: Visualize Your Financial Growth with Projections
Use this calculator to see how your investments can grow with compound interest. Adjust the inputs to match your financial situation and goals.
| Year | Starting Balance | Contributions | Interest | Ending Balance |
|---|
Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It's often called "interest on interest" and can cause wealth to grow exponentially over time.
Where:
The Power of Compounding: Albert Einstein reportedly called compound interest the "eighth wonder of the world." When you start early and let your money grow over time, even small regular investments can grow into substantial amounts.
Compound interest works by earning interest on both your initial investment and the interest that accumulates over time. This creates a snowball effect where your money grows faster as time goes on.
If you invest $5,000 annually starting at age 25 with a 7% return, by age 65 you would have approximately $1,068,048.
If you wait until age 35 to start investing the same amount, you would have only $505,365 by age 65.
That 10-year delay costs you over $560,000 in potential growth!
The longer your money compounds, the more dramatic the growth. Starting early is the most powerful factor in building wealth through compounding.
Higher returns accelerate compounding. Even a small difference in annual return can result in significantly larger amounts over long periods.
Consistently adding to your investment increases the base amount that compounds, accelerating growth.
The more frequently interest compounds, the faster your money grows. Daily compounding yields slightly more than monthly, which yields more than annual compounding.
Compound interest applies to various financial products and scenarios:
Important: While compound interest can work for you in investments, it works against you with debt. High-interest debt like credit cards can quickly become unmanageable due to compounding.
While it's tempting to check frequently, compound interest works best when left undisturbed. Quarterly or annual reviews are typically sufficient for long-term investments.
Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal plus accumulated interest, leading to exponential growth.
While compound interest alone won't necessarily make you wealthy, it's a powerful tool when combined with consistent investing, time, and reasonable returns. Most millionaires built their wealth through consistent investing over decades.
Inflation reduces the purchasing power of money over time. To truly benefit from compound interest, your returns should outpace inflation. Aim for investments that provide returns above the inflation rate.
This depends on the interest rates. Generally, if your debt interest rate is higher than your expected investment returns, prioritize paying off debt first. If investment returns are likely to be higher, investing may make more sense.