Compound Interest Calculator
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Understanding Compound Interest
What is Compound Interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. This creates a snowball effect, where your money grows exponentially over time.
The Power of Compounding
- Earnings generate more earnings
- Growth accelerates over time
- Earlier start means bigger returns
- Regular contributions amplify growth
Factors Affecting Returns
- Initial Investment: Starting amount
- Contribution Amount: Regular additional investments
- Interest Rate: Annual return rate
- Time Period: Investment duration
- Compounding Frequency: How often interest is calculated
- Inflation: Purchasing power impact
Investment Strategies
- Start investing early to maximize compound growth
- Make regular contributions to accelerate wealth building
- Reinvest dividends and interest payments
- Consider tax-advantaged accounts
- Diversify investments to manage risk
- Account for inflation in long-term planning
- Review and rebalance periodically