Compound Interest Calculator
Calculate the future value of an investment with compound interest and optional contributions.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods. It's often called 'interest on interest.'
How does compound interest work?
Compound interest works by reinvesting earned interest, allowing your money to grow exponentially as interest is earned on both the original amount and previously earned interest.
Why is compound interest important for investing?
It's crucial for long-term wealth building because it significantly accelerates the growth of your investments compared to simple interest, maximizing your returns over time.
What factors affect compound interest growth?
Key factors include the initial principal, the annual interest rate, the compounding frequency (e.g., monthly, annually), the investment duration, and any regular additional contributions.
What is the difference between simple and compound interest?
Simple interest is earned only on the original principal amount. Compound interest is earned on the principal plus any accumulated interest, leading to faster growth.