What is compound interest?

Compound interest is the interest you earn on both your original principal and the interest you've already earned. For example, if you invest $100 at 10% interest, you earn $10 in year 1. In year 2, you earn 10% on $110 ($11), not just on the original $100.

How often should interest compound?

Most savings accounts compound daily or monthly. Investment accounts may compound quarterly or annually. More frequent compounding means faster growth, but the difference between monthly and daily compounding is usually small for typical interest rates.

What's the difference between simple and compound interest?

Simple interest is calculated only on the principal amount. Compound interest is calculated on principal plus previously earned interest. Compound interest always grows faster than simple interest over time.

How do regular contributions affect compound interest?

Regular contributions add new principal throughout the investment period, and each contribution starts earning compound interest immediately. This creates a powerful growth effect, especially over long time periods.

What's the rule of 72?

The rule of 72 is a quick way to estimate how long it takes for an investment to double. Divide 72 by the interest rate. For example, at 8% interest, your money would double in about 9 years (72 ÷ 8 = 9).

How does compound interest affect loans?

Compound interest works against you with loans and credit cards. The interest compounds on the unpaid balance, making debt grow faster. This is why paying off high-interest debt quickly is so important.

Compound Interest Calculator

Project wealth accumulation with precision compound interest calculations across various compounding frequencies and contribution schedules. Essential for investment strategists, retirement planners, and financial goal achievers seeking detailed growth projections and wealth-building insights.

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Quick Investment Scenarios

Common investment scenarios for reference

Investment Details

Enter your initial investment and growth parameters

Initial Principal ($)

Annual Interest Rate (%)

Time Period (years)

Compounding Frequency

Monthly Contribution ($, optional)

How it works: Compound interest grows your investment exponentially. A = P(1 + r/n)^(nt). More frequent compounding and regular contributions accelerate growth significantly over time.

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