Compound Interest Calculator
Accumulation Schedule
Understanding the Compound Interest Calculator
Compound interest is the interest you earn on both your original money and the interest you've already earned. This calculator helps you visualize this powerful concept by projecting how your savings can grow over time. By entering your initial investment, regular contributions, and expected interest rate, you can see a detailed forecast of your financial future.
Key Terms Explained
- Initial Investment: The starting amount of money you put into your investment.
- Periodic Contribution: The regular amount you add to your investment (e.g., monthly or annually).
- Compounding Frequency: How often the interest is calculated and added to your principal. More frequent compounding (like monthly) leads to faster growth than less frequent compounding (like annually).
- Tax Rate: The percentage of your interest earnings that you'll pay in taxes. This calculator applies the tax annually to the interest earned in that year.
- Inflation Rate: The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The "Buying Power" result shows you what your future balance would be worth in today's dollars.
Frequently Asked Questions (FAQ)
What is the "Rule of 72"?
The Rule of 72 is a quick way to estimate how long it will take for an investment to double. Simply divide 72 by your annual interest rate. For example, an investment with an 8% annual return will double in approximately 9 years (72 / 8 = 9).
Why are regular contributions so important?
Regular contributions are crucial because they consistently increase your principal amount. This means each time interest is compounded, it's calculated on a larger balance, accelerating your investment's growth significantly over the long term.
How does contributing at the beginning vs. the end of a period affect my results?
Contributing at the beginning of each period gives your money slightly more time to earn interest compared to contributing at the end. Over many years, this small difference can lead to a noticeably larger ending balance.