Calculate Compound Interest
Watch your money grow over time with the power of compounding.
Future Value
Total Contributions: $130,000
Year-by-Year Growth
See exactly how your wealth builds over time| Year | Contributions | Interest Earned | Ending Balance |
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The Magic of Compound Interest: Building Wealth Over Time
Albert Einstein reportedly called compound interest the "eighth wonder of the world," and for good reason. It is the most powerful tool in any investor's arsenal, allowing your money to generate its own earnings. This free compound interest calculator lets you visualize the exponential growth of your wealth, whether you're saving for retirement, a child's education, or financial independence.
Simple vs. Compound Interest: What's the Difference?
To appreciate compounding, you must first understand simple interest. Simple interest is calculated only on the initial amount you invest. If you invest $1,000 at 5% simple interest, you earn $50 every year—forever.
Compound interest, however, is calculated on the initial principal AND the accumulated interest from previous periods. In year two, you earn 5% on $1,050 ($52.50). Over decades, this "interest on interest" snowball effect creates a massive gap between those who save early and those who wait.
The Factor of Time: Why Starting Now Matters
The most important variable in the compound interest formula isn't the interest rate or the initial investment - it's time. Every year you delay starting can cost you tens of thousands of dollars in future wealth. This is often called the "Cost of Delay."
The Rule of 72
Want to know how long it takes for your money to double? Divide 72 by your expected interest rate. At a 7% return, your money doubles roughly every 10 years!
Frequently Asked Questions
Does this account for inflation?
This calculator shows nominal growth. To see your "real" purchasing power, you should subtract the estimated inflation rate (historically ~2-3%) from your expected interest rate before calculating.
Where can I get these interest rates?
The stock market (S&P 500) has historically averaged around 7-10% annually before inflation. High-yield savings accounts and CDs currently offer 4-5%, while government bonds vary based on economic conditions.