Compound Interest Calculator

Compound Interest Calculator





€0

Before using the calculator, read the introduction with explained concepts

The objective of this calculator is to intuitively grasp the power of compounding for wealth building.

According to an article published in the Journal of Economic Education in 2016, less than one-third of the U.S. population comprehends how compound interest fundamentally works.

The idea of compound interest has been around a long time, with limited evidence suggesting ancient civilizations may even have known about it. At the Louvre in Paris, there exists a clay tablet from Babylon, possibly dating from between 2000 to 1700 B.C., which appears to show a compound interest problem. However, it seems likely that it wasn’t until medieval times that mathematicians began to analyse compound interest fully.

Here is the part of returns that is contributed by compound interest for a 30-yr time horizon (7% annual return)

 

Compound interest is interest added to the principal of a deposit or loan so that the added interest also earns interest from then on.

This addition of interest to the principal is called compounding. 

Compound interest is one of the keys to wealth building. The earlier that you invest your money in an investment vehicle that compounds, the more money you will accumulate. A little money invested early can potentially result in a bigger nest egg than a lot of money invested closer to the goal. 

Our interest calculator gives you a projected future balance.

Here’s how to use it:

  1. Enter an initial deposit figure
  2. Enter a percentage return rate that your portfolio will generate
  3. Include any regular monthly or yearly deposits
  4. Enter the time horizon of your investment portfolio
  5. Select your compounding interval (daily, monthly, weekly monthly or yearly compounding)

You can use the results as a guide to create a saving strategy to maximise your future wealth.

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

YearInterest CalculationInterest EarnedEnd Balance
Year 1$10,000 x 5%$500$10,500
Year 2$10,500 x 5%$525$11,025
Year 3$11,025 x 5%$551.25$11,576.25
Year 4$11,576.25 x 5%$578.81$12,155.06
Year 5$12,155.06 x 5%$607.75$12,762.82
Year 6$12,762.82 x 5%$638.14$13,400.96
Year 7$13,400.96 x 5%$670.05$14,071
Year 8$14,071 x 5%$703.55$14,774.55
Year 9$14,774.55 x 5%$738.73$15,513.28
Year 10$15,513.28 x 5%$775.66$16,288.95

DISCLAIMER

All information found here, including any ideas, opinions, views, predictions expressed or implied herein, are for informational, entertainment or educational purposes only and do not constitute financial advice. Consider the appropriateness of the information having regard to your objectives, financial situation and needs, and seek professional advice where appropriate. Read our full terms and conditions.

OTHER TOOLS

Tools: ETF Fee Calculator

REACH FINANCIAL INDEPENDENCE SOONERSign up to best of business news, informed analysis and opinions on what matters to you.Invalid email address Exclusive features will be

Read More »

REACH FINANCIAL INDEPENDENCE SOONER

Invalid email address
Exclusive features will be available to members only. And as you've seen, High Quality Research you won't get anywhere else. Unsubscribe at any time.
About Raph Antoine 83 Articles
Raph Antoine is a Portfolio Manager and Institutional Advisor that witnessed first-hand the 2008 Global Financial Crisis and the 2011 European Debt Crisis working for some of the most prestigious names in the financial industry. Raph has experience across multiple asset classes including Fixed Income and Equity products as well as Special Situations and Restructurings in multiple jurisdictions. Raph holds an MSc in Financial Engineering and is a CFA (Chartered Financial Analyst) Charterholder. He usually rides one of his two bikes. Rarely, a Canyon Ultimate CF SLX 8.0 (that is currently in family's attic) and most of the time a Gravel Pinnacle Arkose (his favourite) that he used to Cycle the World.