See exactly how your money grows with compound interest — including monthly contributions, inflation adjustment, and the Rule of 72.
Calculate how your investments grow over time with compound interest — including the inflation-adjusted real value of your future wealth.
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Compound interest is the most powerful force in personal finance. The math is simple; the discipline to let it work is the hard part. Time is the variable that matters most — and the one you can't get back.
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus all accumulated interest. Over time, compound interest grows exponentially while simple interest grows linearly. Most investments — stocks, bonds, savings accounts — use compound interest, which is why long-term investing is so powerful.
More frequent compounding generates slightly higher returns because interest is calculated and added back to your balance more often. Monthly compounding generates more than quarterly, which generates more than annual. The difference is small in percentage terms but compounds into meaningful amounts on large balances over decades.
Conservative planning uses 5–6% for balanced portfolios. Equity-heavy portfolios have historically averaged 8–10% nominally, or about 6–7% inflation-adjusted over long periods. Always use conservative estimates for planning. Past returns don't guarantee future results.
In a taxable account, you'll pay capital gains taxes annually on dividends and when you sell. In tax-advantaged accounts (401k, IRA), gains compound untaxed. This difference in effective compounding rate can result in dramatically different outcomes over 20–30 years — which is why account type is often as important as investment selection.
Compound interest works against you when you carry debt. Credit card interest at 20% compounds against you with the same mathematical power that 8% stock returns work for you. Eliminating high-interest debt before focusing on investment compounding is often the highest-ROI financial decision available.