Compound Interest
See how your investments grow over time with the power of compound interest.
Investment Details
Starting Amount
$
Monthly Contribution
$
Annual Return Rate
%
Time Period
years
Compound Frequency
▼
Investment Growth
$0
Future Value
Total Contributed
$0
Total Interest
$0
Total Return
0%
Interest Share
0%
Growth Over Time
Year 0
Year 10
Year 20
Contributions
Total Value
Contributions vs Interest Earned
📅 Balance Milestones
📊 Rate Comparison
| Return Rate | Future Value | Interest Earned |
|---|
The Magic of Compound Interest
Compound interest means earning interest on your interest. Unlike simple interest (calculated only on the principal), compound interest grows exponentially over time.
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) – 1) / (r/n)]
Where A = final amount, P = principal, r = annual rate, n = compounds per year, t = years, PMT = periodic contribution.
The Rule of 72
A quick way to estimate how long it takes to double your money: divide 72 by your annual return rate.
Years to Double ≈ 72 ÷ Interest Rate
At 7% return, your money doubles in about 10.3 years. At 10%, it doubles in just 7.2 years. This simple rule shows why even small rate differences matter enormously over time.
Keys to Building Wealth
- Start early: Time is your biggest advantage. Starting at 25 vs 35 can mean 2x more at retirement, even with the same contributions.
- Be consistent: Regular monthly contributions add up. $500/month at 7% for 30 years = $567,000 (you only put in $180,000).
- Increase contributions: Raise your contribution 1% each year. Small increases compound dramatically.
- Minimize fees: A 1% fee vs 0.1% fee can cost you 25% of your final balance over 40 years.
Important Considerations
- Returns vary: This calculator assumes constant returns. Real investments fluctuate — stock market averages ~7% after inflation, but individual years range from -30% to +30%.
- Inflation matters: $1 million in 30 years won’t buy what it does today. Consider using “real” returns (nominal rate minus ~3% inflation).
- Taxes: Investment gains may be taxed. Use tax-advantaged accounts (401k, IRA, Roth) when possible.
- Fees compound too: High expense ratios eat into your returns year after year. Choose low-cost index funds.