See the power of compound interest over time. Calculate how your investments grow with regular contributions and reinvested earnings.
Enter your initial investment, regular contribution amount, interest rate, and time period. The calculator shows how compound interest accelerates your wealth growth.
Use for investment planning, savings goals, comparing investment options, or understanding long-term wealth building. Demonstrates why starting early matters.
Calculate how your investment grows over time with compound interest and regular contributions
Enter your investment information
Compound interest is interest earned on both your initial principal AND previously earned interest. It's often called "interest on interest" and is the foundation of wealth building.
Simple Interest: Earns interest only on principal Compound Interest: Earns interest on principal + accumulated interest
| Year | Simple Interest | Compound Interest | Difference |
|---|---|---|---|
| 1 | $10,500 | $10,500 | $0 |
| 2 | $11,000 | $11,025 | $25 |
| 3 | $11,500 | $11,576 | $76 |
| 4 | $12,000 | $12,155 | $155 |
| 5 | $12,500 | $12,763 | $263 |
Albert Einstein allegedly called compound interest "the eighth wonder of the world" because:
The more frequently interest compounds, the more you earn - but the effect is relatively modest.
| Frequency | Compounds Per Year | Calculation Periods |
|---|---|---|
| Annually | 1 time | Once per year |
| Semi-Annually | 2 times | Every 6 months |
| Quarterly | 4 times | Every 3 months |
| Monthly | 12 times | Every month |
| Daily | 365 times | Every day |
| Continuously | Infinite | Mathematical limit |
| Compounding Frequency | Final Amount | Total Interest | vs. Annual |
|---|---|---|---|
| Annually | $26,533 | $16,533 | - |
| Semi-Annually | $26,851 | $16,851 | +$318 |
| Quarterly | $27,015 | $17,015 | +$482 |
| Monthly | $27,126 | $17,126 | +$593 |
| Daily | $27,181 | $17,181 | +$648 |
| Continuously | $27,183 | $17,183 | +$650 |
Bottom Line: Don't stress over compounding frequency. Focus on:
The Rule of 72 is a simple mental math formula to estimate how long it takes to double your money through compound interest.
Years to Double = 72 ÷ Interest Rate
| Interest Rate | Years to Double | Your Money Becomes |
|---|---|---|
| 2% | 36 years | $10,000 → $20,000 |
| 4% | 18 years | $10,000 → $20,000 |
| 6% | 12 years | $10,000 → $20,000 |
| 8% | 9 years | $10,000 → $20,000 |
| 10% | 7.2 years | $10,000 → $20,000 |
| 12% | 6 years | $10,000 → $20,000 |
Example: $10,000 at 8% (doubles every 9 years)
| Years | Doublings | Amount |
|---|---|---|
| 0 | 0 | $10,000 |
| 9 | 1 | $20,000 |
| 18 | 2 | $40,000 |
| 27 | 3 | $80,000 |
| 36 | 4 | $160,000 |
The Rule of 72 is derived from the natural logarithm of 2 (approximately 69.3), but 72 is used because it has many divisors, making mental math easier.
Pro Tip: Use the Rule of 72 to quickly evaluate investment opportunities and understand the power of different return rates.
Both strategies have advantages. The best choice depends on your situation and goals.
Advantages:
Disadvantages:
Advantages:
Disadvantages:
| Strategy | Approach | Best Scenario |
|---|---|---|
| Lump Sum | Invest $12,000 on Jan 1 | Market rises steadily all year |
| DCA | Invest $1,000/month for 12 months | Market volatile or declining early, recovering later |
Historical data (Vanguard study):
If you have a lump sum available:
If investing from income:
Best of Both: Regular contributions PLUS investing windfalls (bonuses, tax refunds, inheritances)
Remember: Time in the market beats timing the market. The worst strategy is staying in cash waiting for the "perfect" time.
Inflation erodes purchasing power over time, meaning your money buys less in the future than it does today.
| Scenario | Nominal Return | Inflation | Real Return | What It Means |
|---|---|---|---|---|
| Good | 10% | 3% | ~7% | Money actually growing |
| Break Even | 3% | 3% | ~0% | Maintaining purchasing power |
| Losing | 2% | 3% | ~-1% | Losing purchasing power |
| Period | Average Annual Inflation |
|---|---|
| 2000-2010 | 2.6% |
| 2010-2020 | 1.8% |
| 2020-2024 | 4.5% (higher due to pandemic) |
| Long-term average | ~3.0% |
At 3% Annual Inflation:
| Years | Nominal Value | Purchasing Power (Today's Dollars) | Loss |
|---|---|---|---|
| Today | $100,000 | $100,000 | - |
| 10 years | $100,000 | $74,409 | -25.6% |
| 20 years | $100,000 | $55,368 | -44.6% |
| 30 years | $100,000 | $41,199 | -58.8% |
This calculator displays nominal returns (the actual dollar amounts) because:
| Investment | Typical Nominal Return | After 3% Inflation | Real Return |
|---|---|---|---|
| Cash/Savings | 0.5-2% | -2.5% to -1% | Losing |
| Bonds | 3-5% | 0-2% | Barely keeping pace |
| Stocks | 8-10% | 5-7% | Growing wealth |
| Real Estate | 7-10% | 4-7% | Growing wealth |
Bottom Line: Your investment returns must beat inflation to actually grow your wealth. That's why holding too much cash long-term is risky - inflation silently erodes its value.
For long-term goals (10+ years), invest in assets that historically outpace inflation:
Have more questions? These calculators provide estimates for educational purposes only. For personalized financial advice, consult with a qualified financial professional. See our disclaimer for more information.