📈 Compound Interest Calculator
See how your money grows with compound interest. Add monthly contributions and compare compounding frequencies.
📊 Year-by-Year Breakdown
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📖 The Power of Compound Interest
Compound interest is often called the "eighth wonder of the world." Unlike simple interest (calculated only on the principal), compound interest earns interest on both the principal AND previously accumulated interest. This creates exponential growth over time.
The formula is: A = P(1 + r/n)^(nt) + PMT × [(1 + r/n)^(nt) - 1] / (r/n), where P is the principal, r is the annual rate, n is compounding frequency, t is time in years, and PMT is the periodic contribution.
For example, $10,000 invested at 7% annual return for 30 years grows to $76,123 with no additional contributions. Add $500/month and it becomes $680,191. That's the power of consistent investing combined with compound growth.
❓ Frequently Asked Questions
Yes, but less than you might think. More frequent compounding (daily vs. annually) produces slightly higher returns. For example, $10,000 at 7% for 20 years: annually = $38,697, monthly = $40,387, daily = $40,552. The difference between monthly and daily is minimal.
The S&P 500 has averaged about 10% annually before inflation (7% after inflation) since 1928. Conservative bonds average 3-5%. High-yield savings accounts currently offer 4-5%. Use 7% as a reasonable long-term estimate for diversified stock investments.