Compound Interest Calculator – Plan Your Investment Growth | Homtide

Use Homtide’s Compound Interest Calculator to estimate how your investment will grow over time. With this simple tool, you can calculate the power of compound interest based on your principal, rate, and time period. Whether you're saving for retirement, a large purchase, or simply growing your wealth, our tool helps you make informed decisions.

Compound Interest Calculator

Results

Future Value$0.00
Interest Earned$0.00
Total Amount (Principal + Interest)$0.00
Effective Annual Rate (EAR)0.00%
Annual Interest Earned$0.00

Frequently Asked Questions about Compound Interest

What is compound interest?

Compound interest is when the interest on your savings or loan is added to the principal, so you earn interest on the interest as well. It helps your money grow faster over time.

How does compound interest work?

Compound interest works by calculating interest on both the original amount and the interest already earned. The more frequently the interest is added (compounded), the faster your money grows.

What is the formula for compound interest?

The formula for compound interest is:

A = P(1 + r/n)^(nt)

Here's what each term means:

  • A = Final amount after interest (principal + interest).
  • P = Initial amount (the principal).
  • r = Annual interest rate (written as a decimal, e.g., 5% = 0.05).
  • n = Number of times interest is added each year (monthly, quarterly, etc.).
  • t = Time the money is invested or borrowed for (in years).

What is the difference between simple interest and compound interest?

Simple interest is only calculated on the initial amount you invest or borrow. Compound interest, on the other hand, adds interest to both the original amount and the accumulated interest, allowing your money to grow faster over time.

How often should I compound interest for maximum returns?

The more often interest is compounded, the better. For example, daily compounding will grow your money more quickly than monthly or yearly compounding. So, the ideal is to compound as frequently as possible.

What is the effective annual rate (EAR)?

The effective annual rate (EAR) shows you the real rate of return on an investment when compounding occurs more than once per year. It’s a useful way to compare different investment options.

How do monthly contributions affect compound interest?

If you add money regularly to your investment, it increases the overall interest you earn because the new contributions will also earn compound interest. The more you contribute, the more your money grows.

Can I lose money with compound interest?

Compound interest works for both savings and loans. On savings, it helps you earn more. However, with loans, compound interest can work against you because you could end up paying more in interest over time.

How do I calculate compound interest manually?

You can calculate compound interest manually using the formula mentioned earlier. Start by determining your principal, interest rate, time period, and how often interest is compounded. Then, plug those values into the formula to get the final amount.