Growth can compound on prior growth
Understand how time and compounding frequency affect a balance.
Growth can compound on prior growth
Understand how time and compounding frequency affect a balance.
What is compound interest?
Compound interest is interest calculated on both the original principal and accumulated interest. The effect can become more visible over longer periods when interest remains invested.
The basic formula
For a fixed nominal annual rate compounded m times per year, future value can be modelled as principal multiplied by (1 + rate divided by m) raised to m times the number of years.
Frequency and time
More frequent compounding changes the mathematical result. The actual product terms determine how and when interest is credited.
Where projections can mislead
A constant rate is a simplifying assumption. Investment returns fluctuate, savings rates can change, and taxes or fees can reduce the final amount.
Try different assumptions
Use the InvestCalc compound interest calculator to compare rates, time periods and compounding frequencies.
Put the numbers into context
Use an InvestCalc tool to explore an estimate with your own assumptions.
Explore calculators ↗