About

Albert Einstein reportedly called compound interest the "eighth wonder of the world." It is the process where the interest you earn on your savings begins to earn interest itself. Over long periods, this creates an exponential growth curve that can turn modest monthly contributions into significant wealth.

This tool separates your "Principal" (the money you put in) from your "Interest" (free money generated by the market) to visually demonstrate why starting early is the most effective financial strategy.

Formulas

The Future Value of a series of contributions is calculated using:

FV = P(1 + r)^t + PMT × (1 + r)^t - 1r

Where P is the initial deposit, PMT is the periodic contribution, r is the rate per period, and t is the total number of periods.

Reference Data

Year	Total Contribution	Interest Earned	Total Balance
Year 1	$1,200	$60	$1,260
Year 5	$6,000	$850	$6,850
Year 10	$12,000	$3,400	$15,400
Year 20	$24,000	$14,200	$38,200
Year 30	$36,000	$40,500	$76,500

Frequently Asked Questions

No, this calculator shows the 'Nominal' value of your money. To account for purchasing power, you can subtract the expected inflation rate (e.g., 3%) from your interest rate input.

Most savings accounts compound monthly or daily. Investment accounts (like stocks) don't strictly 'compound' in a fixed schedule, but using an annual average return with annual compounding is a standard approximation for long-term growth.

In the early years, your principal is small, so the interest earned is negligible. As your balance grows, the interest is calculated on a larger sum, causing the curve to steepen. This is why the last 5 years of saving often generate more returns than the first 15 years combined.