Compound Interest Calculator
Calculation Result
-
Initial Lump Sum:
$1,000.00
-
Monthly Contribution:
$100.00
-
Annual Interest Rate:
5%
-
Time:
5 years
-
Compound Frequency:
Annually
-
Total Contributions:
$7,000.00
-
Final Amount:
$7,907.04
-
Interest Earned:
$907.04
Growth Chart
Use the form above to calculate compound interest with initial lump sum and monthly contributions.
Example: $1000 initial, $100 monthly, 5% interest rate, 5 years, compounded monthly.
What is 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.
Compound interest is calculated on the initial principal and also on the accumulated interest of previous periods. It can be thought of as "interest on interest," and will make a sum grow at a faster rate than simple interest, which is calculated only on the principal amount.
What does this Calculator do?
- Calculate Growth: It computes how an investment will grow over time with compound interest.
- Consider Monthly Contributions: The calculator factors in regular monthly contributions to the investment.
- Flexible Compounding: It allows for different compounding frequencies (annually, semi-annually, quarterly, monthly, daily).
- Visual Representation: Provides a chart to visualize the growth of the investment over time.
- Detailed Breakdown: Shows a clear breakdown of initial investment, contributions, and interest earned.
- Customizable Inputs: Users can adjust initial investment, monthly contribution, interest rate, time period, and compounding frequency.
- Instant Calculations: Provides immediate results as users input or change their parameters.
Why is understanding Compound Interest important?
- Investment Growth: It demonstrates how investments can grow exponentially over time.
- Savings Strategy: Helps in planning long-term savings and understanding the impact of early and consistent saving.
- Debt Management: Illustrates how debt, especially with high interest rates, can grow if not managed properly.
- Financial Planning: Essential for retirement planning and achieving long-term financial goals.
- Power of Time: Shows the significant impact that time has on investment growth.
- Compare Investments: Allows for comparison between different investment strategies and options.
- Educational Tool: Serves as a practical way to understand and visualize financial concepts.