Compound interest is often called the "eighth wonder of the world" because of its powerful ability to grow wealth over time. Unlike simple interest, which is calculated only on the principal amount, compound interest is calculated on the principal amount plus the accumulated interest of previous periods.
How This Calculator Works
Our Compound Interest Calculator assumes that your interest is compounded monthly and that you make your contributions at the end of every month. The formula used accounts for two distinct growth paths:
Principal Growth: The growth of your initial lump sum investment over the specified time period.
Contribution Growth: The accumulation of your monthly additions, which have less time to grow than the initial principal but add up significantly over time.
Why Start Early?
Time is the most critical factor in compounding. Consider this example: If you invest $5,000 with a $200 monthly contribution at an annual return of 7%:
In 10 Years: You would have approximately $43,865.
In 20 Years: That number jumps to roughly $119,663.
In 30 Years: The total reaches an impressive $277,693.
As you can see, extending the timeline by 10 years more than doubles the result, illustrating the exponential nature of compound interest.
Key Definitions
Initial Investment: The amount of money you start with today.
Monthly Contribution: The amount you plan to add to your investment every month.
Annual Interest Rate: The expected yearly rate of return. The stock market historically averages around 7-10% (inflation-adjusted 7%), while savings accounts may offer 0.5% to 4%.
function calculateCompoundInterest() {
// 1. Get Input Values
var P = parseFloat(document.getElementById('initialInvestment').value);
var PMT = parseFloat(document.getElementById('monthlyContribution').value);
var r = parseFloat(document.getElementById('interestRate').value);
var t = parseFloat(document.getElementById('investmentYears').value);
// 2. Defaulting Logic (if inputs are empty or invalid)
if (isNaN(P)) P = 0;
if (isNaN(PMT)) PMT = 0;
if (isNaN(r)) r = 0;
if (isNaN(t)) t = 0;
// 3. Validation Message (Optional logic, handling simply by running calc)
if (t <= 0 && r <= 0 && P <= 0 && PMT <= 0) {
alert("Please enter valid positive numbers for your investment details.");
return;
}
// 4. Mathematical Constants
var n = 12; // Monthly compounding
var decimalRate = r / 100;
var totalMonths = t * 12;
// 5. Calculation Logic
// Future Value of the Lump Sum (Principal)
// Formula: FV = P * (1 + r/n)^(nt)
var futureValuePrincipal = P * Math.pow((1 + (decimalRate / n)), totalMonths);
// Future Value of the Series (Monthly Contributions)
// Formula: FV = PMT * [ (1 + r/n)^(nt) – 1 ] / (r/n)
var futureValueSeries = 0;
if (decimalRate !== 0) {
futureValueSeries = PMT * (Math.pow((1 + (decimalRate / n)), totalMonths) – 1) / (decimalRate / n);
} else {
// If interest rate is 0, it's just simple addition
futureValueSeries = PMT * totalMonths;
}
var totalFutureValue = futureValuePrincipal + futureValueSeries;
// Calculate Total Invested (Principal + All Contributions)
var totalPrincipalInvested = P + (PMT * totalMonths);
// Calculate Interest Earned
var totalInterestEarned = totalFutureValue – totalPrincipalInvested;
// 6. Formatting Results
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
// 7. Display Results
document.getElementById('displayPrincipal').innerText = formatter.format(totalPrincipalInvested);
document.getElementById('displayInterest').innerText = formatter.format(totalInterestEarned);
document.getElementById('displayTotal').innerText = formatter.format(totalFutureValue);
// Show the results container
document.getElementById('cicResult').style.display = 'block';
}