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Compound Interest Calculator

Calculate compound interest with optional regular contributions

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Compound Interest Calculator Guide: Calculate Investment Growth & Returns

A compound interest calculator projects growth on a starting balance with a stated rate, compounding frequency, and optional contributions. It answers "What will my money grow to?" and "How much do I need to contribute to hit a target?"

What is Compound Interest Calculator?

The compound interest calculator models balances over time using regular compounding and optional periodic contributions or withdrawals. It is useful for savings goals, retirement planning, and comparing accounts.

How to Use the Compound Interest Calculator

  1. Enter starting amount (P), annual rate r, compounding frequency (n), and years t.
  2. Add contributions (PMT) per period and choose timing (end/start of period).
  3. Compute final balance (FV), interest earned, and contribution totals.
  4. Optionally set a target and solve for PMT required.
  5. Compare monthly vs quarterly vs annual compounding.

Formulas & Methods

  • Future value (no contributions): FV = P*(1 + r/n)^(n*t)
  • Future value with contributions (end of period):
    FV = P*(1 + r/n)^(n*t) + PMT*(((1 + r/n)^(n*t) - 1)/(r/n))
  • Start-of-period contributions: multiply PMT term by (1 + r/n)
  • Effective annual rate (APY/EAR): EAR = (1 + r/n)^n - 1
  • Continuous compounding (optional): FV = P*e^(r*t)

Assumptions & limitations

  • Rate r is nominal and constant; real markets vary.
  • Taxes, fees, and inflation reduce real returns unless modeled.

Examples

Example A — Monthly compounding with contributions
P = $5,000, r = 6%, n = 12, t = 10, PMT = $150 (end).
FV ~ 5,000*(1+0.06/12)^(120) + 150*(((1+0.06/12)^(120)-1)/(0.06/12)) ~ $33,400 (approx).

Example B — APY from nominal
r = 4.5%, n = 12 -> EAR = (1+0.045/12)^(12)-1 ~ 4.59%.

| Setting | Impact | |---|---| | Higher n (more compounding) | Slightly increases growth | | Earlier contributions | Earn more periods | | Fees/negative months | Reduce net growth |

Pro Tips & Best Practices

  • Focus on savings rate and consistency—they dominate long-term outcomes.
  • Compare accounts using APY/EAR, not just nominal rates.
  • Reinvest dividends/interest to harness compounding fully.
  • Adjust for inflation to evaluate real purchasing power.

Related Calculators

FAQ

Q: What is compound interest?

A: Interest calculated on the initial principal and on accumulated interest from previous periods.

Q: What formula does the calculator use?

A: A = P*(1 + r/n)^(nt). With contributions: FV = P(1 + r/n)^(nt) + PMT(((1 + r/n)^(n*t) - 1)/(r/n)) for end-of-period payments.

Q: What is APY/EAR?

A: Effective Annual Rate accounts for compounding: (1 + r/n)^n - 1.

Q: How do contributions timing affect results?

A: Start-of-period contributions earn one extra period: multiply the PMT term by (1 + r/n).

Q: Can the calculator handle negative returns or fees?

A: Yes—enter a net rate (after fees) or add annual fee as a negative cash flow.

Compliance note: This article is for information only and not financial advice.

Call to Action

Run your numbers and save a preset—revisit monthly to keep contributions aligned with your goals.