Compound Interest Calculator
What is Compound Interest?
Compound interest is interest calculated on the initial principal plus accumulated interest from previous periods. It's what Albert Einstein called 'the eighth wonder of the world'.
Key components:
Rule of 72:
A quick way to calculate how long it will take your money to double is to divide 72 by the annual interest rate. For example, with 7% annually, your money will double in approximately 10.3 years (72 ÷ 7).
Investment Strategies
Maximize compound interest:
- Start investing as early as possible
- Keep your investments long-term
- Reinvest all profits
- Make regular contributions
Investment options:
- Index mutual funds
- Diversified ETFs
- High-yield savings accounts
- Pension plans
💡 Important tip:
The key to success with compound interest is patience and consistency. Small amounts invested regularly can generate great results in the long run.
Frequently Asked Questions
What is a realistic rate of return?
Historically, the stock market has offered 7-10% annual returns in the long term. For more conservative investments, you can expect 3-5% annually.
When should I start investing?
As soon as possible. Every year you delay your investment can cost you thousands in lost compound interest.
Is it better to invest all at once or gradually?
Both strategies have advantages. Gradual investing (DCA) reduces volatility risk, while lump sum investing can maximize time in the market.