Compound Interest Calculator: Your Path to Wealth

Albert Einstein reportedly called compound interest the eighth wonder of the world. Understanding how it works is crucial for building long-term wealth.

What is Compound Interest?

Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods. Unlike simple interest, your money grows exponentially over time.

The Formula

The compound interest formula is: A = P(1 + r/n)^(nt)

• A = Final amount
• P = Principal (initial investment)
• r = Annual interest rate (decimal)
• n = Number of times interest compounds per year
• t = Time in years

Real-World Example

If you invest $10,000 at 8% annual interest compounded monthly for 20 years, you'll end up with approximately $49,268. That's over $39,000 in interest earnings!

Start Early

The key to maximizing compound interest is time. Starting early, even with small amounts, can lead to significant wealth accumulation due to the exponential growth effect.