Calculate Your Compound Interest
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How Compound Interest Works
Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. This creates a snowball effect where your money grows at an accelerating rate over time.
The formula for compound interest is:
A = P × (1 + r/n)^(n×t)
Where:
- A = the future value of the investment/loan
- P = the principal investment amount
- r = the annual interest rate (decimal)
- n = number of times interest is compounded per year
- t = the time the money is invested for, in years
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Quick Tips
Start early! Even small amounts invested regularly can grow significantly over time due to compounding.
Higher compounding frequencies (monthly vs. annually) can lead to slightly higher returns over long periods.
Regular contributions can dramatically increase your final balance, even if they're small.