Compounded Interest Calculator

Compound interest is a fundamental concept in wealth building, where your investment earns interest not only on the initial principal but also on the accumulated interest over time. This “interest on interest” effect can significantly boost your savings, especially over long periods. Understanding and leveraging compound interest can be a game-changer in achieving your financial goals.

Instructions:

1. Enter Initial Principal: The amount of money you start with.
2. Estimated Rate of Return (%): The annual return rate you expect to earn on your investment.
3. Contribution Frequency: How often you plan to add to your investment (e.g., monthly, annually).
4. Number of Years: The total period over which you plan to invest.
5. Additional Contribution: The amount you will contribute at each frequency interval.

Example Calculation

Let’s say you want to invest $10,000 in a savings account with a 5% annual yield, compounded daily. You don’t plan to add additional funds after your initial deposit. Here’s how you would use the calculator:

• Initial Deposit: $10,000
• Contribution Amount: $0 (since no additional contributions will be made)
• Contribution Frequency: Ignore this field
• Years of Growth: 1 (start with 1 year, then increase to see longer-term growth)
• Estimated Rate of Return: 5%
• Compound Frequency: Daily

Example Results:

• After 1 Year:
  • Interest Earned: $512.67
  • Total Balance: $10,512.67
• After 2 Years:
  • Interest Earned in Year 2: $538.96
  • Total Interest Earned Over 2 Years: $1,051.63
  • Total Balance: $11,051.63
• After 10 Years:
  • Total Interest Earned: $6,486.65
  • Total Balance: $16,486.65

The hypothetical example is for illustration purposes only, not intended to be a recommendation or tax/legal advice.

Written by Bradford Pine Bradford Pine Wealth Group – New York City Financial Advisors The views and opinions expressed in an article or column are the author’s own and not necessarily those of Cantella & Co., Inc. It was prepared for informational purposes only. It is not an official confirmation of terms. It is based on information generally available to the public from sources believed to be reliable but there is no guarantee that the facts cited in the foregoing material are accurate or complete. Comments may not be representative of the experience of other investors. Investor comments and experiences are not indicative of future performance or results. Views and opinions expressed in the comments section are the author’s own and not those of Cantella & Co., Inc. No one posting a comment has been compensated for their opinions.