Compound Interest Calculator
Calculate how your investments grow with compound interest and monthly contributions
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How Compound Interest Works
Compound interest is the interest calculated on the initial principal and the accumulated interest from previous periods. This means your money grows faster over time because you're earning interest on your interest.
For example, if you invest $10,000 at 7% annual return with $500 monthly contributions for 10 years, you'll have approximately $106,639. You contributed $70,000, meaning you earned $36,639 in compound interest.
Key Factors:
- Time: The longer you invest, the more compound interest you earn
- Rate of Return: Higher returns compound faster
- Regular Contributions: Adding money monthly accelerates growth
- Starting Amount: A larger initial investment compounds more
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and accumulated interest from previous periods. This allows your investment to grow exponentially over time.
How often is interest compounded?
This calculator compounds interest monthly, which is common for most investment accounts. Some accounts compound daily, weekly, or annually.
Should I invest monthly or lump sum?
Both strategies work, but regular monthly contributions (dollar-cost averaging) can help reduce risk and take advantage of market fluctuations over time.