CalcFinPro
Back to Home

Investment Growth Calculator

The power of compound interest, visualized. See how small contributions today grow into massive wealth tomorrow.

How Compound Interest Works

Compound interest is "interest on interest." It makes your money grow faster over time because you earn returns on both your original money and the returns you've already received.

Frequently Asked Questions

What is a realistic rate of return?
  • S&P 500 (Stocks): Historically ~10% average (7% inflation-adjusted).
  • High Yield Savings Account: Typically 3-5%, depending on federal rates.
  • Bonds: Generally 3-5%, offering lower risk than stocks.
How often is interest compounded?
Most stock market investments effectively compound continuously or daily as prices move. Bank accounts typically compound monthly or daily. Our calculator assumes monthly compounding for simplicity and accuracy in standard savings scenarios.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual interest rate. For example, at a 7% return, your money doubles in approximately 10.3 years (72 / 7).

Compound Interest Mastery

Albert Einstein reportedly called compound interest the "eighth wonder of the world." For investors, it is the most powerful tool for long-term wealth creation. Unlike simple interest, which is only calculated on the principal, compound interest is calculated on the principal plus the accumulated interest from previous periods.

The Three Pillars of Growth

  1. Time: The longer your money stays invested, the more pronounced the compounding effect becomes. Starting just 5 years earlier can result in hundreds of thousands of dollars in difference at retirement.
  2. Rate of Return: Small increases in your annual return rate (e.g., from 7% to 8%) can lead to exponential gains over decades.
  3. Consistency: Regular monthly contributions (Dollar Cost Averaging) reduce the impact of market volatility and ensure your "snowball" keeps growing.

Risk vs. Reward

When using this calculator, it's important to be realistic about your expected rate of return. While the stock market (S&P 500) has averaged ~10% over the last century, this comes with significant short-term volatility. Investors who cannot tolerate large swings often opt for a "balanced" portfolio of 60% stocks and 40% bonds, which historically yields lower but more stable returns (approx. 7-8%).