Discover the incredible power of compound interest and how it can transform your savings and investments over time through the magic of exponential growth.
Albert Einstein famously called compound interest "the eighth wonder of the world" and "the most powerful force in the universe." This isn't an exaggeration - compound interest has the power to turn modest, regular savings into substantial wealth over time.
Unlike simple interest (which only earns returns on your initial investment), compound interest earns returns on both your initial principal AND the accumulated interest from previous periods. This creates an exponential growth curve that accelerates over time.
Our calculator uses the compound interest formula with regular contributions:
A = P(1 + r/n)^(nt) + C[((1 + r/n)^(nt) - 1)/(r/n)]
Where:
• A = Future Value
• P = Initial Principal
• C = Regular Contribution
• r = Annual Interest Rate
• n = Compounding Frequency
• t = Time in Years
A quick way to estimate how long it takes your money to double is the Rule of 72. Simply divide 72 by your annual interest rate:
Years to Double = 72 ÷ Annual Interest Rate
For example, at 6% interest, your money doubles every 12 years (72 ÷ 6 = 12). At 8%, it doubles every 9 years. This rule demonstrates the power of higher returns over time.
Sarah invests $200/month starting at age 25. By age 65, with 7% returns, she has $525,000.
Total contributions: $96,000
John invests $400/month starting at age 35. By age 65, with 7% returns, he has $488,000.
Total contributions: $144,000
Starting 10 years earlier with half the monthly contribution results in more money despite contributing less overall.
Time is your greatest asset
| Year | End Balance | Total Invested | Interest Earned |
|---|