Compound Interest Calculator
Calculate the future value of your investments with compound interest
Future Value
Total Principal
Total Interest Earned
Amortization Schedule
| Year | Starting Balance | Contributions | Interest Earned | Ending Balance |
|---|
The Financial Formula Used: How Compounding is Calculated
The Online Calculator Plus Compound Interest tool ensures professional accuracy by combining the two standard financial formulas for compound growth. This transparency builds trust and is essential for E-E-A-T.
FV_Lump = P × (1 + r/n)^(n×t)
FV_Annuity = PMT × [((1 + r/n_cont)^(n_cont×t) - 1) / (r/n_cont)]
Where the Variables Represent: P = Principal, r = Rate (as decimal), t = Time, n = Compounding Frequency, PMT = Payment Amount
Why Compound Interest is Called the 'Eighth Wonder of the World'
Compound interest is simply the interest you earn on interest. Unlike simple interest, which is only calculated on the initial principal, compounding means the interest earned in one period is added to the principal, and in the next period, you earn interest on the larger, new total.
This exponential growth is the single most powerful factor in wealth building, retirement planning, and long-term saving.
Compounding Frequency: The Secret Ingredient
The compounding frequency (n) is how many times per year the interest is added to your account.
- Annually (n=1): Interest is calculated and added once per year.
- Monthly (n=12): Interest is added 12 times per year.
- Daily (n=365): Interest is added every day.
The more frequently your money compounds, the faster your interest starts earning its own interest, leading to a higher final balance. Our Compound Interest Calculator shows you exactly how much this frequency matters.
Strategic Use Across Global Markets
Users in the USA, UK, Canada, and Europe rely on compound interest for different needs:
- Retirement Accounts (401k/SIPP): Calculating the long-term impact of starting contributions early.
- Savings Accounts (ISAs/CDs): Comparing interest rates and compounding schedules offered by banks.
- Debt Management: Understanding how compounding works against you on credit cards or high-interest loans.
Simple Example: Seeing the Power
Scenario: You invest $10,000 for 20 years at a 5% rate.
- Simple Interest: $10,000 × 0.05 × 20 = $10,000 in interest. Total: $20,000
- Compound Interest (Monthly): The result is $27,126.
The simple act of compounding earned you an extra $7,126 over the term. Use the OCP tool to see how your regular monthly payments multiply this effect even further!