The Compounding Interest Calculator can estimate the future value of an investment portfolio, based on initial investment, monthly contributions, compounding frequency, and annual interest rate.
Compound interest is the addition of interest to the initial investment. Rather than taking the interest out of the account, it is added to the total, so that the next period interest is calculated on the previous investment PLUS any accumulated interest in previous periods.
Imagine you start with $100 in an investment account, and you expect to earn 10% interest.
-During year one, you would earn $10 in interest, because 10% of 100 is 10. You now have $110
-During the next year, you would earn $11, because 10% of 110 is 11. You now have $121
-During the next year, you would earn $12.10, because 10% of 121 is 12.10. You now have $133.10
This tool helps illustrate the power of investing early, and reinvesting interest back into the portfolio