SimpleCalc.co

Compound Interest Calculator

Compound Interest Calculator
See how your savings can grow with the power of compound interest.

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Understanding Compound Interest

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. Albert Einstein famously called it "the eighth wonder of the world."

How It Works

When you save or invest, you earn a return on your initial money. With compound interest, you also earn a return on that return. Over time, this effect can accelerate your wealth growth significantly compared to simple interest.

Key Factors

The growth of your money is influenced by three main factors: the amount you start with (principal), the rate of return (interest rate), and the length of time you let it grow (term). Making regular additions also dramatically increases the final amount.

Logic & Formulas

The calculator finds the future value by combining two standard financial formulas: the future value of a single sum and the future value of a series (annuity).

  1. Future Value of Principal: This calculates the growth of your initial investment.

    FV_principal = P * (1 + r)^n

  2. Future Value of Additions: This calculates the growth of all your monthly contributions.

    FV_additions = A * [((1 + r)^n - 1) / r]

Where:

  • P = Principal Amount
  • A = Monthly Addition
  • r = Monthly Interest Rate (Annual Rate / 12)
  • n = Number of Months (Years * 12)

The total future value is the sum of these two results.