Want to grow your wealth faster? Use our Compound Interest Calculator to instantly create an exact projection for compound growth for your savings account or investment over a period of time, on the basis of the anticipated rate of interest. Just enter the value for which you wish to calculate the compound interest and other necessary details like the annual interest, compounding period, additional payments(optional), etc. Then, just press the Calculate button and you will get the results on your device's screen within an instant.
Most importantly, the Compound Interest Calculator saves you from all the hassle you face while calculating the compound interest manually. So, use our tool in order to make your interest-related calculations accurate and fast.
In addition, you can calculate the future value, the total interest earned, and the total yield in terms of percentage. Also, it gives a comparison between the total amount of money deposited and the total interest earned, in form of a pie chart. In addition, it provides the graphical representation of the future values over time, consisting of the original principal and the cumulative interest. Lastly, the Compound Interest Table shows the balance and the payment made in each period.
Money makes money, and the money that money makes, makes more money. Compound interest is the interest earned on the money saved plus the interest earned. It speeds us the growth of your savings or investments. Inversely, it increases the debt balances you owe over time. In short, with compound interest, your interest earns interest.
Let's understand this term with an example.
Moreover, you can make additional payments at the start or the end of the compounding year. Also, the interest is compounded at different intervals of time. Such as annually, monthly, daily, and even repeatedly.
Consider that the interest you earned compounded monthly rather than annually on your savings account. Then, at the end of ten years, your total balance will be $14,908. Also, you will earn an additional $106 from interest being compounded more repeatedly.
So, till now we have gained a lot of knowledge about the term "Compound Interest". Now let's learn how to calculate it manually.
However, our compound interest calculator provides you with the most effortless way to calculate the growth in your money over time with the compounding interest. But if you still wish to calculate it on your own, then follow the instructions below.
So, before getting started, let's know about the compound interest formula. Because it's key to getting all the required results.
A = Final amount (principal + interest earned)
P = Principal amount (present value)
r = Annual interest rate (in decimal)
n = Number of compounding periods per year
t = Total time (in years)
Now let's take an example to understand it more deeply.
Suppose you make an investment of $5000 at the rate of 5% annual interest compounded monthly. Find out what your investment will become after 10 years.
P = $5000
r = 5/100 = 0.05 (in decimal)
n = 12 (compounded monthly)
t = 10
Now place all the values in the compound interest formula.
|A = P( 1 +||
|A = 5000( 1 +||
|)(12 × 10)|
A = 5000 × (1.0041667)120
A = 5000 × 1.647016
So, A = 8235
Thus, your investment becomes $8,235 earning you a total interest of $3,235 in 10 years.
Compounding is a mathematical process to grow the potential earnings from an investment or savings. It makes sure that the interest is earned on the original amount as well as on the returns. It is a continual process and benefits the most over the long term. Compounding can turn even small investments into large ones if you give enough time.
Here, we are discussing some of the tips for you to make maximum profit from the compounding process.
Start making investments the moment you start earning. Remember that compounding works best when you start early and keep on investing for the long term.
Let's say you start investing now. You make an investment of $1000/month for 5 years at a 5% rate of annual interest for yearly compounding. Your friend made the same investment as you but started 2 years later than you. Then, your maturity amount will be $70,347 and your friend will get $40,564. A total loss of $29,783. So, it's better to begin early.
Maintain discipline with respect to your investments if you wish to benefit from compounding. So, ensure that you invest regularly.
Patience is the key to profits in compounding. Do not let your personal biases or the changes in the market influence you.
Use the following compound interest formula and figure out the final value(A).
|A = P( 1 +||
Simple interest is calculated on the principal amount only. While compound interest is calculated on the previous interest plus the principal amount. Also, in simple interest, the interest for each year is the same, unlike compound interest.
It is useful in various ways that are given below:
By this, we mean at what interval of time the interest will be accrued. For example, every month, every quarter (every three months), or annually.