Compound interest is the addition of interest to the principal sum of a loan or deposit. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.
How does the snowball effect work?
Unlike simple interest, which only calculates interest on the initial amount, compound interest calculates interest on both the initial principal and the accumulated interest from previous periods. This allows your money to grow exponentially faster over time.
Why use this calculator?
Calculating compound interest manually is complex, especially with regular monthly contributions. This free calculator helps you visualize your future wealth, plan your retirement, and understand the massive impact of starting to invest early.