Discover the power of compound interest and see how your investments can grow over time. Calculate returns with different contribution frequencies, compounding periods, and currencies.
Learn how compound interest works and why it's called the "eighth wonder of the world"
Compound interest allows your money to grow exponentially as you earn interest on both your principal and previously earned interest.
The longer your money is invested, the more powerful compound interest becomes. Starting early makes a huge difference in your final returns.
Adding regular contributions to your investment amplifies the compound effect and accelerates your wealth building.
More frequent compounding (daily vs. annually) can increase your returns, though the effect diminishes with higher frequencies.
Even small differences in interest rates can lead to significant differences in final amounts over long periods due to compounding.
Use compound interest calculations to plan diversified investment portfolios across different asset classes and time horizons.
Master investment planning with our comprehensive guide
To calculate compound interest for a one-time investment:
To plan investments with regular contributions:
Tip: Monthly contributions often provide better results than annual contributions due to more frequent compounding.
To understand your investment's performance:
Example: Planning for retirement at age 65
Common questions about compound interest and investing
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which is calculated only on the principal amount, compound interest allows your money to grow exponentially over time. Albert Einstein allegedly called it "the eighth wonder of the world" because of its powerful wealth-building potential.
More frequent compounding generally leads to higher returns, but the effect diminishes as frequency increases. For example, the difference between daily and monthly compounding is usually small, while the difference between annual and monthly compounding can be more significant. The formula shows that daily compounding will always yield slightly more than annual compounding, but the practical difference may be minimal for typical investment amounts.
Interest rates vary significantly by investment type. Savings accounts typically offer 0.5-2%, government bonds 2-4%, corporate bonds 3-6%, and stock market investments have historically averaged 7-10% annually over long periods. However, past performance doesn't guarantee future results, and higher returns usually come with higher risk. It's important to choose rates that match your investment strategy and risk tolerance.
Both are important, but regular contributions often have a greater impact on long-term wealth building. While a larger initial investment benefits from more time to compound, consistent monthly contributions provide dollar-cost averaging benefits and ensure steady portfolio growth. The key is to start as early as possible with whatever amount you can afford, then increase contributions over time as your income grows.
Our calculator provides mathematically accurate results based on the compound interest formula. However, real-world investments involve variables not captured in this calculator, such as market volatility, fees, taxes, and changing interest rates. Use these calculations as a planning tool and baseline estimate, but consult with financial advisors for comprehensive investment planning and consider factors like inflation, taxes, and investment fees in your actual strategy.
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