How Does This Compound Interest Calculator Work?
Enter your initial investment, annual interest rate, time period, and compounding frequency. You can also add an optional monthly contribution to estimate your final balance, total contributions, and compound interest earned. Monthly contributions are assumed to be added at the end of each month.
Compound Interest Formula
A is the final amount, P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the number of years. When monthly contributions are included, the calculator compounds the initial investment and adds each monthly contribution at the end of the month.
Simple Interest vs Compound Interest
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus previously earned interest, allowing the balance to grow faster over time.
Frequently Asked Questions About Compound Interest
What is compound interest?
Compound interest is interest earned on both your original principal and the interest that has already been added to your balance.
How often is interest compounded?
Interest may be compounded annually, semi-annually, quarterly, monthly, daily, or at another frequency depending on the account or investment.
Does more frequent compounding increase returns?
Generally, yes. With the same stated annual interest rate, more frequent compounding can produce a slightly higher final balance because interest is added to the balance more often.
Can I include monthly contributions?
Yes. Enter an amount in the monthly contribution field to estimate how regular deposits may increase your final balance and total interest earned.