Compound Interest Calculator
See how your investments grow over time with the power of compound interest
Calculate Your Investment Growth
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💰 Quick Answer
With an initial investment of $10,000.00 at 7% interest compounded monthly for 10 years, plus $100.00 monthly contributions, your investment will grow to $37,405.09. You'll earn $15,405.09 in interest.
Dr. Snezana Lawrence
Mathematical Historian
15+ years experience
PhD from Yale University. Published mathematical historian ensuring precision in all calculations.
Education
PhD in Mathematical History - Yale University
📑 Table of Contents
📈 Year-by-Year Growth
| Year | Total Contributions | Interest Earned | Balance |
|---|---|---|---|
| 1 | $11,200.00 | $762.16 | $11,962.16 |
| 2 | $12,400.00 | $1,666.16 | $14,066.16 |
| 3 | $13,600.00 | $2,722.27 | $16,322.27 |
| 4 | $14,800.00 | $3,941.46 | $18,741.46 |
| 5 | $16,000.00 | $5,335.54 | $21,335.54 |
| 6 | $17,200.00 | $6,917.15 | $24,117.15 |
| 7 | $18,400.00 | $8,699.84 | $27,099.84 |
| 8 | $19,600.00 | $10,698.15 | $30,298.15 |
| 9 | $20,800.00 | $12,927.66 | $33,727.66 |
| 10 | $22,000.00 | $15,405.09 | $37,405.09 |
🤔 What is Compound Interest?
Compound interest is often called the "eighth wonder of the world" because of its powerful ability to grow wealth over time. Unlike simple interest, which is calculated only on the original principal, compound interest is calculated on both the principal and the accumulated interest from previous periods.
This means your money earns interest on interest, creating a snowball effect that accelerates your wealth growth. The longer you invest, the more dramatic this compounding effect becomes.
Simple vs. Compound Interest Example
Simple Interest
$10,000 at 7% for 10 years:
Interest = $10,000 × 7% × 10 = $7,000
Final: $17,000
Compound Interest (Monthly)
$10,000 at 7% for 10 years:
With monthly compounding
Final: $20,096.61
📐 The Compound Interest Formula
A = P(1 + r/n)nt
Where:
- A = Final amount (principal + interest)
- P = Principal (initial investment)
- r = Annual interest rate (as a decimal)
- n = Number of times interest is compounded per year
- t = Time in years
For Regular Contributions
When you make regular contributions, the future value of those contributions is calculated using the Future Value of Annuity formula:
FV = PMT × ((1 + r/n)nt - 1) / (r/n)
⚡ The Power of Compounding
The true magic of compound interest reveals itself over long time periods. Here's how $10,000 grows at 7% annual return:
The Rule of 72
A quick way to estimate how long it takes to double your money: divide 72 by your interest rate. At 7% return, your money doubles in approximately 72 ÷ 7 = 10.3 years.
💡 Tips to Maximize Your Returns
Start Early
Time is your biggest ally. Starting 10 years earlier can double your final amount.
Contribute Regularly
Even small monthly contributions can significantly boost your final wealth.
Reinvest Dividends
Always reinvest dividends and interest to maximize compounding.
Choose Higher Frequency
More frequent compounding (daily vs. annually) yields slightly higher returns.
Minimize Fees
Even 1% in fees can cost you hundreds of thousands over decades.
Stay Invested
Avoid withdrawals and let your money compound uninterrupted.
❓ Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. This means your money earns interest on interest, leading to exponential growth over time.
How is compound interest calculated?
The compound interest formula is A = P(1 + r/n)^(nt), where A is the final amount, P is principal, r is annual interest rate, n is compounding frequency per year, and t is time in years.
What's the difference between simple and compound interest?
Simple interest is calculated only on the principal amount, while compound interest is calculated on principal plus accumulated interest. Over time, compound interest results in significantly more growth.
Does compounding frequency matter?
Yes, more frequent compounding leads to slightly higher returns. Daily compounding yields more than monthly, which yields more than annual. However, the difference between daily and monthly is relatively small.
What's a good interest rate for compound growth?
Historically, the S&P 500 has returned about 7-10% annually after inflation. High-yield savings accounts offer 4-5%, while bonds typically offer 2-5%. The "right" rate depends on your risk tolerance and investment goals.
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Dr. Snezana Lawrence
Mathematical Historian | PhD from Yale
Dr. Lawrence is a published mathematical historian with a PhD from Yale University. She ensures mathematical precision and accuracy in all our calculations, conversions, and academic score calculators. Her expertise spans computational mathematics and educational assessment.
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