Compound Interest Calculator
Annually (1)
Semi-annually (2)
Quarterly (4)
Monthly (12)
Daily (365)
Understanding Compound Interest
Compound interest is often called "interest on interest." It's a powerful concept in finance because it allows your investments to grow exponentially over time. Unlike simple interest, which is calculated only on the initial principal amount, compound interest is calculated on the principal amount plus all the accumulated interest from previous periods.
How Compound Interest Works
The magic of compounding lies in its snowball effect. When you earn interest, that interest is added to your principal. In the next period, you earn interest not only on your original principal but also on the previously earned interest. This accelerated growth is what makes compounding so effective for long-term wealth building.
The Compound Interest Formula
The formula used to calculate compound interest is:
A = P (1 + r/n)^(nt)
Where:
- A = the future value of the investment/loan, including interest
- P = the principal investment amount (the initial deposit or loan amount)
- r = the annual interest rate (as a decimal)
- n = the number of times that interest is compounded per year
- t = the number of years the money is invested or borrowed for
Why is Compound Interest Important?
Compound interest is fundamental for:
- Investing: It's the primary driver of growth in savings accounts, stocks, bonds, and mutual funds over the long term. The earlier you start investing, the more time compounding has to work its magic.
- Saving for Retirement: Understanding compounding is crucial for planning how much you need to save to achieve your retirement goals.
- Loans: While beneficial for investments, compounding can also work against you with loans. High-interest debt that compounds can become very difficult to pay off.
By consistently investing and allowing your earnings to compound, you can significantly increase your wealth over time. Even small amounts invested early can grow into substantial sums thanks to the power of compounding.
" +
" Initial Investment: $" + principal.toFixed(2) + "" +
" Annual Interest Rate: " + interestRate.toFixed(2) + "%" +
" Investment Period: " + time + " years" +
" Compounding Frequency: " + getFrequencyName(compoundingFrequency) + "" +
" Total Amount After " + time + " Years: $" + amount.toFixed(2) + "" +
" Total Interest Earned: $" + totalInterestEarned.toFixed(2) + "" +
"
";
}
function getFrequencyName(frequency) {
switch (frequency) {
case 1: return "Annually";
case 2: return "Semi-annually";
case 4: return "Quarterly";
case 12: return "Monthly";
case 365: return "Daily";
default: return "Other";
}
}
.calculator-wrapper {
font-family: Arial, sans-serif;
border: 1px solid #ddd;
padding: 20px;
border-radius: 8px;
max-width: 500px;
margin: 20px auto;
background-color: #f9f9f9;
}
.calculator-title {
text-align: center;
margin-bottom: 20px;
color: #333;
}
.calculator-form .form-group {
margin-bottom: 15px;
display: flex;
flex-direction: column;
}
.calculator-form label {
margin-bottom: 5px;
font-weight: bold;
color: #555;
}
.calculator-form input[type="number"],
.calculator-form select {
padding: 10px;
border: 1px solid #ccc;
border-radius: 4px;
font-size: 1rem;
width: 100%;
box-sizing: border-box; /* Include padding and border in the element's total width and height */
}
.calculator-form button {
background-color: #4CAF50;
color: white;
padding: 12px 20px;
border: none;
border-radius: 4px;
cursor: pointer;
font-size: 1.1rem;
width: 100%;
transition: background-color 0.3s ease;
}
.calculator-form button:hover {
background-color: #45a049;
}
.calculator-result {
margin-top: 25px;
padding: 15px;
border: 1px solid #eee;
border-radius: 4px;
background-color: #fff;
text-align: left;
}
.calculator-result p {
margin-bottom: 10px;
color: #333;
}
.calculator-result .highlight {
font-weight: bold;
color: #28a745;
}
.calculator-article {
font-family: Arial, sans-serif;
line-height: 1.6;
margin: 30px auto;
padding: 20px;
border: 1px solid #ddd;
border-radius: 8px;
max-width: 700px;
background-color: #fff;
}
.calculator-article h2,
.calculator-article h3 {
color: #333;
margin-top: 1.5em;
margin-bottom: 0.5em;
}
.calculator-article ul {
margin-left: 20px;
margin-bottom: 1em;
}
.calculator-article li {
margin-bottom: 0.5em;
}
.calculator-article code {
background-color: #f0f0f0;
padding: 2px 5px;
border-radius: 3px;
}