How Does Compound Interest Work?
Compound interest is the interest on savings calculated on both the initial principal and the accumulated interest from previous periods. It essentially makes your money work for you, resulting in exponential growth over long periods. Unlike simple interest, which is only calculated on the principal amount, compound interest allows your wealth to snowball.
The Power of Regular Contributions
While a single lump-sum investment grows nicely, adding consistent monthly contributions acts as fuel for the compounding engine. The more you contribute, the larger the base amount that earns interest next year. This calculator assumes contributions are made at the end of each month.