Estimate investment growth over time.
| Year | Starting balance | Contributions | Ending balance |
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Click "Calculate growth" to see your investment growth schedule |
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See how time affects your investment growth
Future value = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) ÷ (r/n)]
The exact terms used depend on the contribution and compounding frequency selected.The estimate uses the starting balance, contribution or withdrawal schedule, time horizon and assumed rate entered. Compounding frequency, contribution timing, inflation, fees, taxes and employer or program rules affect how closely the estimate resembles a real account.
The Compound Interest Calculator measures how much your money will grow if you decide to include interest payments and investment growth to your bank balance, and later grow it on that higher sum. You'll want to include beginning funds/investment, interest rate, rate of compounding and investment time frame/time. You may additionally include periodic deposits, depending at the parameters within the interest calculator.
Your results can also show approximate forthcoming balance, a whole deposit and accumulated interest. Those calculations are mathematical assumptions built around your original inputs rather than an investment assure.
Enter the values that match the account, savings plan, or hypothetical investment scenario you want to evaluate.
Maintain the same interest rate and same contribution interval as the assumptions of the calculator. One of the most common errors made is to leave the calculator set for an annual contribution when entering a monthly one.
Because the balance will also grow at the interest rate that the account balance reaches from interest on interest, the balance over time with the same positive rate grows faster under compound interest than would ever happen with simple interest.
The overall result is impacted by four factors. How those four things are arranged is when a second calculation takes into the equation the number, and value, of contributions and calculates your likely balance in the future!
For instance, let $10,000 be at a positive annual rate. If your interest does not get withdrawn from your account you can calculate your interest on an amount greater than your initial $10,000, this is compound interest.
For a lump-sum investment with no additional contributions, the standard compound interest formula is:
A = P(1 + r/n)nt
Where:
The compound interest earned is:
Interest Earned = A − P
For instance, a 6% per annum interest rate would be written as 0.06 in the equation. If the interest is compounded on a monthly basis, then n=12.
If you add deposits to the mix, the formula also necessitates an extra contributions component. The specific equation employed depends on whether the contributions are made at the start or end of a compounded cycle and the contribution conventions your calculator assumes.
For example, if you deposit 10,000 into a hypothetical account that generates 6% annual interest compounded monthly and is allowed to remain untouched for 10 years.
Your answer is a mathematical projection with the assumption that interest rates are stable and all interest continues to remain within the account. A real world savings account or investment can and will have different interest rates, fees, taxes, deposits, withdrawals and returns.
The Future value is the estimated balance at the time period selected. If you contribute regular deposits, the final amount will be a balance of your original principal, deposits, and growth.
It helps to clearly separate your contributions from the interest or growth that your money earns. The ending value of an account isn't an accurate indicator that the bulk of the value came from compounding. If there was substantial regular contribution, the balance could have grown almost entirely from your contributions.
When comparing scenarios, only vary one assumption at a time. Showing comparisons on interest rates, time frames, contribution levels, or compounding frequency helps illustrate which assumptions influence the projection the most.
Compound interest adds growth onto what you've already earned interest on previously, while simple interest just typically adds the growth rate to the money you put into the investment from day one. As compound growth can then growth further still on the previously earned growth you the figure grows faster.
This may become important to you whether looking into savings, deposits, loans, or to model hypothetical investment growth scenarios. It all comes back to how those underlying financial products are structured.
Compounding frequency indicates the rate at which interest is added to your principal for further calculation. Typical frequencies are yearly, semiannual, quarterly, monthly, and daily.
| Compounding Frequency | Periods Per Year |
|---|---|
| Annually | 1 |
| Semiannually | 2 |
| Quarterly | 4 |
| Monthly | 12 |
| Daily | 365 |
If compounding happens more frequently, the resulting total may be mathematically different, but only if the nominal annual rate used remains constant! Always refer to your product's terms - do not assume any frequency!
Because compounding is applied repeatedly during your chosen time period, time becomes essential. You can achieve a larger number of periods if time for growth is longer.
Take, for instance, how a principal earning a fixed, positive rate for 20 years is likely to reflect a different final projected balance as a compared to a principal kept for 5-10 years. The calculator allows you to compare such scenarios, without requiring you to believe that rate would be kept constant in the future.
The impact of deposits is much greater on the projected ending balance. Every deposit made means that it contributes to principal and there is time for this additional principal to earn more returns or interest.
For instance, a monthly $200 investment for 10 years will come up with a completely different final balance than simply placing down initial cash. Ultimately your contribution level will make up a major difference (which will ultimately matter). The amount of each contribution, its frequency, when contributions occur, and interest rate assumption as much as time and your deposit amount will influence your return.
When considering any two scenarios, always ensure to clarify what amount refers to total contributions or growth. You'll want the user to understand how much of the predicted projected balance represents money put into the account or simply assumed growth.
An Annual Percentage Yield (APY) includes compounding for the period of one year, while an annual interest rate (or nominal rate) can be presented apart from the compounding element. When considering a real account deposit you will want to use the rate and yield as defined by your financial institution.
Do not replace the interest rate with the APY in a formula intended for a nominal rate unless otherwise instructed by the calculator or other financial product you are using.
Compound interest is interest that is calculated on the initial principal and any interest accumulated then left in the account. By leaving the interest earned in the account, the interest earned is then added to the balance for the next calculation of interest.
The formula usually used with any lump sum for a fixed rate with compounding regularily is: A = P(1 + r/n)nt, Where A= Amount of money accumulating over time, P= Present value or principal amount,r = annual rate,n = Number of times that interest is compounded per year and T= Time in years.
Most simple lump sum calculators do not consider recurring deposits. Recurring deposits are factored into the calculation by a calculator designed for this purpose by using contributions amount, time, frequency, rate and time period.
Using the same nominal annual rate and compounding frequently would result in a mathematically distinct, generally higher, mathematical ending value, assuming a positive rate. In practice, an analysis would need to use the specific terms and yield information of the financial product.
A guaranteed return for an investment: An investment account uses complex mathematics of compound interest, which allow projection on paper on the basis of an estimated return, but these figures are based on speculation alone.
The number of compounding periods is influenced by the passage of time. The longer the period of time considered, the more opportunities the stated interest rate has to compound itself on the growing balance, potentially greatly altering the estimated future value.
Create a base case with the contribution and return assumption you consider reasonable. Then test a lower return, a later start or a higher contribution to see which change has the largest effect on the projected value.
When you contribute money regularly, growth compounds on original balances and earlier contributions which aren't touched. How the dates you invest the money will impact those figures are based on when the investment is actually received as a later contribution won't contribute for as long as a earlier investment.
As a simple calculation example, if you make $5,000 initial investment, assuming 5% return, compound interest monthly, add $200 each month over 10 years. the outcome should take your original $5k, $24k from the deposits plus interest on these investments growth.
This approach can be valuable when comparing a large one-time contribution to more incremental ongoing contributions. As with all planning models, the results and their reliance on the planned rate and contributions are, however, purely hypothetical.
| Initial Amount | Annual Rate | Time | Compounding | Estimated Future Value |
|---|---|---|---|---|
| $1,000 | 5% | 5 years | Monthly | $1,283 |
| $1,000 | 5% | 10 years | Monthly | $1,647 |
| $1,000 | 5% | 20 years | Monthly | $2,712 |
| $5,000 | 6% | 10 years | Monthly | $9,084 |
| $10,000 | 6% | 20 years | Monthly | $33,063 |
These figures are mathematical examples using a constant assumed rate and do not represent guaranteed investment results.
The assumed rate of interest has a direct impact on the projected ending balance. The higher the rate, the more mathematically the balance will grow, assuming all other variables are kept constant; the lower the rate, the less growth.
However, as rates are repeatedly applied over time this can result in differences between scenarios becoming far more pronounced with a longer investment term. In the context of investment planning a discount rate should therefore not be seen as a forecast.
Each withdrawal also decreases your account balance, reducing the amount that can compound in the future. Therefore, a simple calculation of compounding interest that doesn’t take into account any withdrawals will differ from the growth of an investment from which funds have been withdrawn during the period of growth.
Do not consider this as an accurate prediction for an account with intended withdrawals If the calculator does not support withdrawing inputting:
Any ongoing fees you pay can take away from the value of assets you expect to invest in the future. An elementary compound interest calculation probably wouldn’t account for account administration fees, investment expense ratios, trading costs, adviser’s fees, and so on.
When comparing real financial products, remember to look at real costs separately. The interest calculation is only mathematical. But even a very low commission will impact the results.
Simple Interest Calculation: Compound interest calculation normally illustrates earnings not tax-adjusted, without user defined tax related information included. How much you will have after taxes, varies based on type of account, origin of revenue, date money is withdrawn and the tax rules in effect at the time of withdrawal.
Hence, a calculator-derived figure cannot be assumed to represent the post-tax figure
If a financial product displays an annual rate and a compounding frequency, the effective amount grown in a year may be different from the displayed rate. This is because the rate is compounded over the year.
This is where the difference matters with other products with different compounding frequencies. When the institution is providing an APY for you then use the APY in the product disclosure, there is nothing to do, however be careful not to substitute these APYs for other products with their calculated nominal rates.
If the base figures or some (or all) of these assumptions were altered, the final calculation would also change. For any real life investement or account a transactions statement will be the real value as quoted by the instutition.