Estimate how compounding amplifies savings and investments over time.
Overview
Compound interest means you earn returns on prior returns, not only on principal.
This effect grows stronger with time and consistent contributions.
Small rate and contribution changes can create large long-term differences.
Use multiple scenarios to keep expectations realistic.
Steps
Set your starting amount.
Use expected nominal return.
Choose monthly, quarterly, or annual.
Optional, but useful for realistic plans.
Review final amount and total interest earned.
Math
A = P(1 + r/n)^(nt) + PMT[((1 + r/n)^(nt) - 1)/(r/n)]
The equation combines compounded principal growth and the future value of recurring deposits.
Worked cases
A = 5,000(1+0.07)^20
Compounding alone can more than triple the principal.
Use full formula with contribution term.
Regular deposits become the largest growth driver.
Compare ending values with same deposits.
Long-term outcomes diverge sharply with higher return assumptions.
Why use this
Questions