Compound Interest Calculator
Investment Results
Year-by-Year Breakdown
| Year | Balance | Contributions | Interest Earned |
|---|
How to Use This Calculator
Enter your initial investment, monthly contribution amount, expected annual return rate, and time horizon. The calculator shows how your money grows with compound interest, including a year-by-year breakdown.
Tip: The S&P 500 has historically returned an average of 7-10% per year (before inflation). For a conservative estimate, use 5-7%; for aggressive, use 8-10%.
Understanding Compound Interest
Compound interest is interest earned on both your initial principal and the accumulated interest from previous periods. Albert Einstein reportedly called it the "eighth wonder of the world." The earlier you start investing, the more time compound interest has to work in your favor.
Compounding Frequency Comparison
More frequent compounding (daily vs. yearly) results in slightly higher returns. However, for long-term investments, the difference between monthly and daily compounding is typically small, while the annual return rate has a much larger impact.
Frequently Asked Questions
Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal plus any accumulated interest. Over time, compounding leads to exponential growth, while simple interest grows linearly.
A conservative estimate is 5-6% annual return. A moderate estimate is 7-8%. An aggressive estimate is 9-10%. These are nominal returns (before inflation). For real (inflation-adjusted) returns, subtract 2-3% for expected inflation.
No. This calculator shows pre-tax investment growth. Actual returns will be lower depending on your tax bracket and account type (taxable vs. tax-advantaged accounts like 401(k) or IRA).