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Calculate compound interest and investment growth with regular contributions. See how your money grows over time with detailed year-by-year breakdown and charts.
Albert Einstein allegedly called compound interest "the eighth wonder of the world." Our calculator shows you exactly how your investments can grow exponentially over time, including the impact of regular monthly contributions to maximize your wealth building potential.
Compound interest is the process where you earn interest not only on your initial investment (principal) but also on the interest that accumulates over time. This creates a snowball effect that can dramatically increase your wealth over long periods.
*Assuming 8% annual return. The early bird invests $48,000 less but ends up with more money!
How often interest is compounded affects your returns. Here's how $10,000 grows over 10 years at 6% annual interest:
While more frequent compounding helps, the difference becomes less significant at higher frequencies.
Invest a fixed amount regularly regardless of market conditions. This strategy reduces the impact of market volatility and can lower your average cost per share over time.
Automatically reinvest dividends and interest to purchase more shares. This accelerates compound growth by increasing the principal amount earning returns.
Use 401(k)s, IRAs, and other tax-advantaged accounts to maximize compound growth by deferring or eliminating taxes on investment gains.
Historical average return: ~10% annually. Higher risk but potentially higher returns over long periods. Best for investors with 10+ year time horizons.
Current rates: 4-5% annually. Low risk, FDIC insured. Good for emergency funds and short-term goals. Interest compounds daily or monthly.
Returns: 3-6% annually. Lower risk than stocks. Good for conservative investors or those nearing retirement. Interest typically compounds annually or semi-annually.
Average returns: 8-12% annually. Provides exposure to real estate markets with high dividend yields. Good for diversification and income generation.
Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest. Compound interest grows exponentially over time.
More frequent compounding is better, but the difference between monthly and daily compounding is minimal. The most important factors are the interest rate and time period.
Conservative: 4-6% (bonds, CDs), Moderate: 6-8% (balanced portfolio), Aggressive: 8-10% (stocks). The S&P 500 has averaged about 10% annually over the past 90 years.
Generally, pay off high-interest debt (credit cards, personal loans) first. If your debt interest rate is lower than expected investment returns, investing might be better. Consider your risk tolerance.