Compound Interest Calculator
Financial Terms Explained
Principal
The initial amount of money you invest or deposit, before any interest or returns are added.
Compound Interest
Interest calculated on both the initial principal and the accumulated interest from previous periods, resulting in interest on interest.
Annual Interest Rate
The percentage of interest earned on an investment or paid on a loan over a one-year period.
Compounding Frequency
How often interest is calculated and added to your principal. More frequent compounding generally results in higher returns.
Additional Contributions
Regular deposits made to your investment after the initial principal investment.
Future Value
The total value of your investment after a specified period, including the principal, additional contributions, and all accumulated interest.
Inflation
The rate at which the general level of prices for goods and services rises, eroding purchasing power over time.
Inflation-Adjusted Value
The future value of your investment adjusted for inflation, showing its real purchasing power in today's dollars.
Amortization Schedule
A table showing the progress of your investment over time, including beginning balances, contributions, interest earned, and ending balances for each period.
5 Smart Compound Interest Tips
- Start investing as early as possible. Time is the most powerful factor in compound growth.
- Increase your savings rate whenever possible. Even a 1% increase in how much you save can make a substantial difference over decades.
- Minimize investment fees. Even a seemingly small difference in expense ratios (e.g., 0.5% vs 1%) can significantly impact your long-term returns.
- Consider the effects of inflation when planning for long-term goals. An investment growing at 7% with 3% inflation is really only growing at 4% in real terms.
- Be consistent with your contributions. Dollar-cost averaging through regular investments can help reduce the impact of market volatility on your portfolio.