Calc

# Compound Interest Calculator

\$
\$
Increase deposits yearly with inflation?

Use the compound interest calculator to gain a picture of how the interest on your savings or investments might grow over a period of months and years. Using the compound interest formula, you can determine how your money might grow with regular deposits or withdrawals.

#### Disclaimer

Whilst every effort has been made in building these compound interest calculators, we are not to be held liable for any special, incidental, indirect or consequential damages or monetary losses of any kind arising out of or in connection with the use of the calculator tools and information derived from the web site. These tools are here purely as a service to you, please use them at your own risk.

The calculations given by the compound interest calculators are only a guide. Please speak to an independent financial advisor for professional guidance. Read the full disclaimer.

## Daily, monthly or yearly compounding

The compound interest calculator includes options for:

• daily compounding
• monthly compounding
• quarterly compounding
• half yearly and yearly compounding

Your savings account may vary on this, so you may wish to check with your bank or financial institution to find out which frequency they compound your interest at. Should you wish to calculate without compounding, give the simple interest calculator a try.

## Compounding of interest

Compound interest is the concept of adding accumulated interest back to the principal sum, so that interest is earned on top of interest from that moment on. The act of declaring interest to be principal is called compounding. Financials institutions vary in terms of their compounding rate requency - daily, monthly, yearly, etc. Should you wish to work the interest due on a loan, you can use the loan calculator.

## Compound interest formula

Compound interest, or 'interest on interest', is calculated with the compound interest formula. Multiply the principal amount by one plus the annual interest rate to the power of the number of compound periods to get a combined figure for principal and compound interest. Subtract the principal if you want just the compound interest. Read more about the formula.

The formula used in the compound interest calculator is A = P(1+r/n)(nt)

• A = the future value of the investment
• P = the principal investment amount
• r = the interest rate (decimal)
• n = the number of times that interest is compounded per period
• t = the number of periods the money is invested for

## Compound interest calculation example

Let's go with a simple example and say you have \$10,000 in your savings account, earning 10% interest per year. Your first 5 years might look like this:

Year Interest Calculation Interest Earned End Balance
Year 1 \$10,000 x 10% \$1,000 \$11,000
Year 2 \$11,000 x 10% \$1,100 \$12,100
Year 3 \$12,100 x 10% \$1,210 \$13,310
Year 4 \$13,310 x 10% \$1,331 \$14,641
Year 5 \$14,641 x 10% \$1,464.10 \$16,105.10

Here's an example chart with a smaller sum of money (\$1,000) using a longer compounding investment period (20 years) at the same 10% per year (to keep the sum simple). Here we compare the benefits of compound interest versus standard interest and no interest at all. When you get into a pattern of regular, consistent investing. the power of compound interest can prove an effective growth strategy for your money, as the deposits mount up and you gain interest on your interest. Find out more in our article, What is compound interest?