| Investment Growth | Amount |
|---|---|
| Initial Principal | $0.00 |
| Total Interest Earned | + $0.00 |
| Future Value | $0.00 |
What is Compound Interest?
Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. At ToolRift, we believe understanding this concept is the first step toward true financial freedom.
The Mathematics of Compounding
The standard formula for compound interest is:
A = P(1 + r/n)^(nt)
Where:
- A is the final amount (Future Value).
- P is the initial principal balance.
- r is the annual interest rate (as a decimal).
- n is the number of times that interest is compounded per unit t.
- t is the time the money is invested for (in years).
Frequency Matters
I often tell my readers that the frequency of compounding can significantly alter the final outcome. Compounding daily will yield more than compounding monthly or yearly, even with the same interest rate. This tool allows you to toggle between frequencies to see this effect in real-time.
Why I Built This Tool
I started ToolRift to provide high-quality, accessible financial tools for everyone. Compounding is a silent partner in your financial journey. By visualizing your balance with our line charts, you can see not just where your money is, but where it's going. Whether you're saving for retirement in a 401k or just keeping money in a high-yield savings account, this calculator gives you the clarity you need to stay committed to your goals.