Compound Interest Calculator
How the Calculator Works
This calculator demonstrates the power of compound interest and regular contributions on your investments. It shows how your money can grow over time, taking into account:
- Your initial investment amount
- Regular monthly contributions
- Annual interest rate (return on investment)
- Additional yearly contributions
- Growth in contribution amounts over time
Enter your details below to see how your investments could grow over time through the power of compounding.
Extra amount to add each year (e.g., bonus)
Increase your monthly deposits by this percentage each year
Key Calculations Explained
Compound Interest Formula
The calculator uses the compound interest formula: A = P(1 + r/n)^(nt), where:
- A = the future value of the investment
- P = the principal investment amount
- r = annual interest rate (decimal)
- n = number of times interest is compounded per year
- t = time the money is invested for in years
Monthly Contributions
Regular contributions are calculated using the future value of an annuity formula, which accounts for:
- Monthly compounding of contributions
- Growth in contribution amounts over time
- Additional yearly lump sum contributions
Important Considerations
Investment Returns
The calculator uses your input for expected annual returns. Remember that past performance is not indicative of future results, and investment returns can vary significantly. Consider using conservative estimates for long-term planning.
Inflation
The calculator does not account for inflation. The future value shown is in today's money terms. For a more accurate picture, consider that inflation typically reduces the purchasing power of money over time.
Tax Considerations
The calculations do not account for taxes on investment returns. In reality, you may need to pay capital gains tax or income tax on your investment returns, which would reduce your actual returns.
Disclaimer: This calculator provides estimates only and should not be considered financial advice. The calculations are based on the information you provide and assume a constant rate of return, which may not reflect actual market conditions. Investment returns are not guaranteed and can go down as well as up. The calculator does not account for fees, taxes, or inflation, which can significantly impact actual returns. Past performance is not indicative of future results. Please consult with a qualified financial advisor for personalized advice regarding your investment strategy.