Compound Interest Calculator
See how your savings and investments can grow over time with the power of compounding.
Calculation Inputs
Calculation Results
How to Use the Compound Interest Calculator
- Enter Initial Investment: Start with the amount of money you are initially investing. This can be zero if you are starting from scratch.
- Set Contributions: Input the amount you plan to contribute monthly and for how many years you will invest.
- Define Interest Rate: Enter the expected annual interest rate and how frequently the interest is compounded (e.g., monthly, annually).
- Analyze Your Growth: The calculator instantly shows the future value of your investment, the total amount you invested, and the total interest earned. The chart visualizes your investment's growth year by year.
The Power of Compound Interest Explained
Compound interest is often called the "eighth wonder of the world," and for good reason. It is the concept of earning "interest on interest," which can make an investment grow at an accelerating rate over time. Unlike simple interest, which is calculated only on the initial principal amount, compound interest is calculated on the principal amount plus the accumulated interest from previous periods. This creates a snowball effect: as your investment grows, it earns more interest, which in turn grows your investment even faster. The key factors that maximize the power of compounding are the **interest rate**, the **frequency of compounding**, and most importantly, the **time period** of the investment. A higher interest rate and more frequent compounding (like monthly instead of annually) will lead to faster growth. However, time is the most powerful ingredient. Even small, regular contributions can grow into a substantial sum over several decades, making compound interest a cornerstone of long-term financial planning, retirement savings, and wealth building.
Key Investment Terms
- Principal: The initial amount of money you invest.
- Monthly Contribution: Regular, additional investments you make, such as in a Systematic Investment Plan (SIP).
- Compounding Frequency: How often the interest is calculated and added to your principal. More frequent compounding leads to slightly higher returns.