Compound Interest Calculator

What is compound interest?

Compound interest is basically the interest you earn on both your original deposit and on the interest you continue to accumulate. Compound interest allows your money (savings or investments) to grow faster over time.

When you open a savings account that pays some kind of interest, your returns are added to the initial balance (or principal) at the end of every compounding period (daily, monthly or yearly). Every time interest is calculated and added to your account, the growing balance results in even more interest earned (like a snowball effect).

Similarly, when you invest your money in a vehicle that offers returns, your money grows faster as the invested amount gets larger and larger. For example, let’s say you invested $1,000 in an investment that offers 5% returns, and that you continue to contribute to that investment $200 per month for 25 years. Assuming a yearly compounding interval, your investment will be worth $120,533.26 after 25 years. 

In both cases, the larger your balance gets, the faster your money will grow thanks to the compounding growth effect. This is why you need to start saving and investing as soon as possible.

Time is on your side!