The Power of Compound Interest: How to Build Wealth Over Time
Albert Einstein reportedly called compound interest the 'eighth wonder of the world.' Understanding how it works can transform your financial future...
Compound Interest Calculator
Calculate how your investments grow with compound interest over time
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Formula
Formula
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)] × (1 + r/n)
A = final amount, P = principal, r = annual rate, n = compounding frequency, t = years, PMT = monthly contribution
How to Calculate Manually
- 1 Determine your initial investment (principal)
- 2 Decide on monthly contribution amount
- 3 Estimate your expected annual return rate
- 4 Choose your investment time horizon
- 5 Select compounding frequency (daily, monthly, quarterly, yearly)
- 6 Calculate: A = P(1 + r/n)^(nt) for principal growth
- 7 Calculate annuity formula for contribution growth
- 8 Sum both components for total future value
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Reference Table
| Annual Return | 10 Years | 20 Years | 30 Years | Doubling Time (Rule of 72) |
|---|---|---|---|---|
| 4% | 1.48x | 2.19x | 3.24x | 18 years |
| 6% | 1.79x | 3.21x | 5.74x | 12 years |
| 8% | 2.16x | 4.66x | 10.06x | 9 years |
| 10% | 2.59x | 6.73x | 17.45x | 7.2 years |
| 12% | 3.11x | 9.65x | 29.96x | 6 years |
Frequently Asked Questions
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What is compound interest?
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How often should interest compound?
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What's the rule of 72?
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