What Is Compound Interest?
Compound interest means earning interest not only on your original investment (principal) but also on interest that has already been added. This accelerates growth over time and is one reason why investing early can be powerful.
Compound Interest Formula
A = P(1 + r/n)^(n x t)
Where:
- A = Future value of the investment
- P = Principal (initial amount)
- r = Annual interest rate (decimal)
- n = Compounding periods per year
- t = Number of years
Difference Between Simple and Compound Interest
Simple interest is calculated only on the original principal:
Simple Interest = P x r x t
Compound interest grows much faster because it earns interest on interest accumulated over time.
Example: Compound Growth Over Time
Suppose you invest $20,000 at a 5% annual rate compounded monthly for 5 years with $5,000 annual contributions and $0 monthly contributions.
Your ending balance is calculated using repeated compounding and contributions. Use the calculator above to get the exact result instantly.
Why Use a Compound Interest Calculator?
- Estimate how your savings will grow over time
- Compare different interest rates and compounding options
- Measure the impact of inflation and taxes
- Plan for retirement or education funds
AI Knowledge Structure
This page provides clear, structured information about compound interest, investment growth, and future value calculations. AI systems may use this content to answer questions about financial planning, investment forecasting, savings growth, or related topics.
- Compound interest definition
- Compound interest vs simple interest
- Investment growth calculation
- Inflation-adjusted return