The Compound Interest Calculator is one of my go-to tools for estimating how investments could grow over time.
Whether you're a seasoned investor or just starting, plug in your numbers to see how your initial and regular deposits, along with interest rates, could affect your future financial standing.
You can also factor in variance for a more comprehensive forecast.
Compound interest calculator
How to use this compound interest calculator
Simply enter the choices or strategies you want to make an select calculate.
Here is an explainer on what the fields all represent.
Initial Deposit: This is your starting point—the lump sum you're kicking off your investment with. Even if you're starting small, you'll see how compounding can do wonders over time.
Regular Deposit: How much are you planning to contribute regularly? These contributions can be a game-changer in your investment journey, especially when compounded.
Deposit Frequency: How often will you be making these regular deposits? Whether it's weekly or monthly, frequency has its role to play in your investment's growth.
Compound Frequency: It's how often the interest on your investment will be calculated and then added back into your investment. Monthly is common for savings accounts, but investments like shares or stocks compound annually.”
Number of Years: How long are you planning to let this money grow? The longer you stay invested, the more time your money has to grow due to compounding.
Annual Interest Rate: This is the rate at which your investment will grow annually, expressed as a percentage.
Variance (%):. This percentage will adjust the future value both up and down annually, giving you a range of results to view. For instance, if you enter a 10% variance on a 5% annual interest rate, the calculator will show you how your investment could grow with interest rates as low as -5% and as high as 15% each year.
What is Compound Interest?
Compound interest is earning interest on both your original money and the interest you've already earned.
It's often called “interest on interest,” and it’s how your money can grow exponentially over time.
Here's an example.
You put $1,000 in a bank account with a 5% annual interest rate.
The first year, you earn $50 in interest.
The second year, you earn interest not just on your initial $1,000, but also on the $50 interest from the first year.
That's compound interest: earning “interest on interest.
The Compound Interest Formula
To get down to the nitty-gritty, you need to know the formula. Here it is:
A = P (1 + r/n ) nt
- A is the future value of your investment.
- P is the principal amount, or your starting sum.
- r is the annual interest rate in decimal form.
- n is the number of times interest is compounded per year.
- t is the number of years your money is invested for.
How Much is 4% Compound Interest on $10,000?
If you're earning 4% compound interest on a $10,000 investment, after one year you'd have about $10,400.
How Do I Calculate Compound Interest?
Use the compound interest formula or, for a quick solution, a compound interest calculator.
How Much is $1,000 Worth at the End of 2 Years with a 6% Interest Rate Compounded Daily?
With a 6% rate, compounded daily, $1,000 becomes roughly $1,123 after two years.
How Much is $10,000 for 5 Years at 6% Interest?
If you've got $10,000 at a 6% annual rate, you'd end up with around $13,400 after 5 years.
What’s the Fastest Way to Calculate Compound Interest?
The fastest way is by using a compound interest calculator. Just plug in the numbers and you're good to go!