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What is the Compound Interest?
Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.
How to Use This Calculator
1
Enter your initial investment amount (Principal).
2
Input the annual interest rate offered.
3
Specify the number of years you plan to invest.
4
Select how often the interest is compounded (e.g., monthly, annually).
5
Click 'Calculate' to see your future balance and total interest earned.
Example Calculation
Investing $1,000 at 5% for 10 years
If you invest $1,000 at an annual interest rate of 5%, compounded monthly for 10 years, your investment will grow to approximately $1,647.01. You will have earned $647.01 in interest.
Frequently Asked Questions
Pro Tips
- Start investing early to maximize the power of compounding.
- Reinvest your dividends and interest earnings.
- Look for higher interest rates and frequent compounding intervals.