Plan your financial future with our comprehensive savings calculator. Understand how compound interest and regular contributions can grow your wealth over time.
Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. Think of it as "interest on interest" - it makes your money grow faster over time. The power of compounding can turn modest savings into substantial wealth, especially when you start early and contribute regularly.
For example, if you invest $1,000 at 5% annual interest, after one year you'll have $1,050. In the second year, you earn interest on $1,050, not just your original $1,000. Over decades, this compounding effect becomes incredibly powerful.
Our calculator uses the future value formula for compound interest with regular contributions:
FV = P × (1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]
Where:
• FV = Future Value
• P = Initial Principal
• PMT = Monthly Contribution
• r = Annual Interest Rate
• n = Compounding Frequency
• t = Time in Years
Inflation reduces the purchasing power of money over time. Our calculator includes an optional inflation adjustment to show you the "real" value of your savings in today's dollars. This helps you understand what your future savings will actually be worth when you need to use them.
For instance, $100,000 in 20 years might only have the purchasing power of $60,000 today if inflation averages 2.5% annually. Planning with inflation in mind ensures your savings goals account for rising costs of living.
The earlier you start saving, the more time compound interest has to work its magic. Even small amounts saved early can outperform larger amounts saved later.
Regular monthly contributions create a powerful savings habit and significantly boost your final balance through dollar-cost averaging.
As your income grows, increase your savings rate. Even a 1% annual increase in contributions can dramatically improve your long-term results.
Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.
More frequent compounding (daily vs. annually) results in slightly higher returns due to interest being calculated on interest more often.
This provides estimates based on fixed rates. Real investments may have variable returns, fees, and taxes that affect final results.
| Year | End Balance | Total Contributed | Interest Earned |
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Read our comprehensive emergency fund guide to learn how much you should really save based on your situation.
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