Compound Interest Vs Continuous Compounding Calculator

This compound interest calculator has more features than most. You can vary both the deposit intervals and the compounding intervals from daily to annually (and everything in between)...Show Full Instructions

This flexibility allows you to calculate and compare the expected interest earnings on various investment scenarios so that you know if an 8% return, compounded daily is better than a 9% return, compounded annually.

It's simple to use. Just enter your beginning balance, the regular deposit amount at any specified interval, the interest rate, compounding interval, and the number of years you expect to allow your investment to grow.

$148,032

Future Value Inflation Adjusted

If you start with $25,000 in a savings account earning a 7% interest rate, compounded monthly, and make $500 deposits on a monthly basis, after 15 years your savings account will have grown to $230,629 -- of which $115,000 is the total of your beginning balance plus deposits, and $115,629 is the total interest earnings.

Yearly Summary

Year	Deposit	Interest	Balance	Inflation Adjusted Balance
Begin	$25,000		$25,000
1	$6,000	$2,040	$33,040	$32,077
2	$6,000	$2,621	$41,661	$39,269
3	$6,000	$3,244	$50,905	$46,585
4	$6,000	$3,912	$60,817	$54,035
5	$6,000	$4,629	$71,446	$61,630
6	$6,000	$5,397	$82,843	$69,380
7	$6,000	$6,221	$95,064	$77,296
8	$6,000	$7,105	$108,169	$85,390
9	$6,000	$8,052	$122,221	$93,672
10	$6,000	$9,068	$137,289	$102,156
11	$6,000	$10,157	$153,446	$110,853
12	$6,000	$11,325	$170,771	$119,775
13	$6,000	$12,577	$189,348	$128,937
14	$6,000	$13,920	$209,269	$138,351
15	$6,000	$15,360	$230,629	$148,032
Totals	$115,000	$115,629	$230,629	$148,032

Comparison

Compound Interval	Interest	Total Amount	Inflation Adjusted Total
Daily	$117,709	$232,709	$149,367
Monthly	$115,629	$230,629	$148,032
Quarterly	$114,640	$229,640	$147,397
Semi-Annually	$113,200	$228,200	$146,473
Annually	$110,467	$225,467	$144,719

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Free Compound Interest Excell Spreadsheet Calculator

Download Compound-Interest-Excel-Template.xlsx for a free, simplified version of this calculator that you can use offline.

Compound Interest – Explained

Compound interest is the most powerful concept in finance. It can either work for you or against you: Compound interest is the foundational concept for both how to build wealth and why it's so important to pay off debt as quickly as possible.

The easiest way to take advantage of compound interest is to start saving! See today's highest-paying online savings accounts.

Compound interest: Frequently-asked questions

What is compound interest?

Compound interest is the total amount of interest earned over a period of time, taking into account both the interest on the money you invest (this is called simple interest) and the interest earned or charged on the interest you've previously earned.

What is the compound interest formula?

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

The compound interest formula solves for the future value of your investment (A). The variables are: P – the principal (the amount of money you start with); r – the annual nominal interest rate before compounding; t – time, in years; and n – the number of compounding periods in each year (for example, 365 for daily, 12 for monthly, etc.).

What's the difference between compound interest and simple interest?

Compound interest takes into account both interest on the principal balance and interest on previously-earned interest. Simple interest refers only to interest earned on the principal balance; interest earned on interest is not taken into account. To see how compound interest differs from simple interest, use our simple interest vs compound interest calculator.

How does compound interest work?

Compound interest has dramatic positive effects on savings and investments.

Compound interest occurs when interest is added to the original deposit – or principal – which results in interest earning interest. Financial institutions often offer compound interest on deposits, compounding on a regular basis – usually monthly or annually.

The compounding of interest grows your investment without any further deposits, although you may certainly choose to make more deposits over time – increasing efficacy of compound interest.

How can I take advantage of compound interest?

• Invest early – As with any investment, the earlier one starts investing, the better. Compounding further benefits investors by earning money on interest earned.
• Invest often – Those who invest what they can, when they can, will have higher returns. For example, investing on a monthly basis instead of on a quarterly basis results in more interest.
• Hold as long as possible – The longer you hold an investment, the more time compound interest has to earn interest on interest.
• Consider interest rates – When choosing an investment, interest rates matter. The higher the annual interest rate, the better the return.
• Don't forget compounding intervals – The more frequently investments are compounded, the higher the interest accrued. It is important to keep this in mind when choosing between investment products.

Related: 5 Financial Planning Mistakes That Cost You Big-Time (and what to do instead!) Explained in 5 Free Video Lessons

How do compounding intervals affect interest earned?

By using the Compound Interest Calculator, you can compare two completely different investments. However, it is important to understand the effects of changing just one variable.

Consider, for example, compounding intervals. Compounding intervals can easily be overlooked when making investment decisions. Look at these two investments:

Investment A

• Beginning Account Balance: $1,000
• Monthly Addition: $0
• Annual Interest Rate (%): 8%
• Compounding Interval: Daily
• Number of Years to Grow: 40
• Future Value: $24,518.56

Investment B

• Beginning Account Balance: $1,000
• Monthly Addition: $0
• Annual Interest Rate (%): 8%
• Compounding Interval: Annual
• Number of Years to Grow: 40
• Future Value: $21,724.52

Notice that the only variable difference here is the compounding interval. Investment A wins over Investment B by $2,794.04. Remember, compounding intervals matter.

Compound interest terms & definitions

Beginning Account Balance – The money you already have saved that will be applied toward your savings goal.

______ Addition ($) – How much money you're planning on depositing daily, weekly, bi-weekly, half-monthly, monthly, bi-monthly, quarterly, semi-annually, or annually over the number of years to grow.

Annual Interest Rate (ROI) – The annual percentage interest rate your money earns if deposited.

Choose Your Compounding Interval – How often a particular investment compounds.

Number of Years to Grow – The number of years the investment will be held.

Future Value – The value of your account, including interest earned, after the number of years to grow.

Total Deposits – The total number of deposits made into the investment over the number of years to grow.

Interest Earned – How much interest was earned over the number of years to grow.

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Source: https://financialmentor.com/calculator/compound-interest-calculator