Calculate the future value of an investment with compound interest.
Annually
Semi-Annually
Quarterly
Monthly
Daily
Projected Future Value
$0.00
Understanding Compound Interest
Compound interest is a powerful concept in finance, often referred to as "interest on interest." Unlike simple interest, which is calculated only on the initial principal amount, compound interest is calculated on the principal amount plus any accumulated interest from previous periods. This means your money grows at an accelerating rate over time, making it a cornerstone of long-term investment strategies.
How the Compound Interest Formula Works
The formula used to calculate compound interest is:
A = P (1 + r/n)^(nt)
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
Breakdown of the Calculator Inputs:
Initial Investment (Principal): This is the starting amount of money you are investing. For example, if you deposit $1,000 into a savings account, that's your principal.
Annual Interest Rate: This is the percentage of the principal that you earn in interest over a year. For instance, a 5% annual rate means you'd earn $50 on a $1,000 principal in the first year if it were simple interest. In our calculator, this is entered as a percentage (e.g., 5 for 5%).
Number of Years: This is the duration for which your investment will grow and compound. Longer periods allow compound interest to demonstrate its full potential.
Compounding Frequency: This is crucial. It determines how often the earned interest is added back to the principal, thus starting to earn interest itself.
Annually (n=1): Interest is calculated and added once per year.
Semi-Annually (n=2): Interest is calculated and added twice per year.
Quarterly (n=4): Interest is calculated and added four times per year.
Monthly (n=12): Interest is calculated and added twelve times per year.
Daily (n=365): Interest is calculated and added every day.
The more frequent the compounding, the faster your money will grow, though the difference might be small for shorter terms.
Why Use a Compound Interest Calculator?
This calculator is an invaluable tool for:
Financial Planning: Estimate how much your savings or investments might grow over time.
Setting Goals: Determine how much you need to invest initially or how long it will take to reach a specific financial target.
Comparing Investments: Understand the potential returns of different investment options with varying interest rates and compounding frequencies.
Understanding Debt: While this calculator focuses on growth, the same principles apply to compound interest on loans (where it works against you).
By inputting different values, you can visualize the impact of small changes in interest rates, time horizons, or compounding frequency on your overall returns. The earlier you start investing and the longer you let your money compound, the more significant the growth will be.
function calculateInterest() {
var principal = parseFloat(document.getElementById("principal").value);
var annualRate = parseFloat(document.getElementById("annualRate").value);
var years = parseFloat(document.getElementById("years").value);
var compoundingFrequency = parseInt(document.getElementById("compoundingFrequency").value, 10);
var resultValueElement = document.getElementById("result-value");
// Input validation
if (isNaN(principal) || principal < 0) {
resultValueElement.innerText = "Invalid Principal";
return;
}
if (isNaN(annualRate) || annualRate < 0) {
resultValueElement.innerText = "Invalid Rate";
return;
}
if (isNaN(years) || years < 0) {
resultValueElement.innerText = "Invalid Years";
return;
}
if (isNaN(compoundingFrequency) || compoundingFrequency <= 0) {
resultValueElement.innerText = "Invalid Frequency";
return;
}
// Convert annual rate percentage to decimal
var rateDecimal = annualRate / 100;
// Calculate future value using the compound interest formula
// A = P (1 + r/n)^(nt)
var exponent = compoundingFrequency * years;
var ratePerPeriod = rateDecimal / compoundingFrequency;
var futureValue = principal * Math.pow(1 + ratePerPeriod, exponent);
// Format the result to two decimal places and add currency symbol
resultValueElement.innerText = "$" + futureValue.toFixed(2);
}