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Compound Interest Calculator
Compounding Interest: A Powerful Investment Strategy
Focusing on compounding interest is a surefire way to generate wealth in the long term. Make compounding your investment a priority.
Initial Deposit
$
Contributions
$
Investment Time Span
Estimated Rate of Return
%
Compound Frequency
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Future Balance
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Here’s how to use Shiirs compound interest calculator:
Using our compound interest calculator is quick and easy. Here are the steps:
-Enter your first deposit
-Then, choose a target monthly or annual contribution that suits your budget (including $0).
-The Future Balance defines how much your savings will increase by a set date.
-To calculate your Future Balance, the calculator factors your initial deposits, monthly/annual contributions, the time span, rate of return, and compound frequency.
-Enter different values to evaluate how those factors impact your Future Balance.
To find the best rates and determine if you’re saving enough money, compare high-yield savings accounts.
How Does Compound Interest Work?
When you save money, you will earn interest on the original deposit. However, you also earn interest on that interest. All of the total interest you earn, on the initial investment its interest, make up compound interest.
If you begin with $100 and earn 2% interest, you earn $2 during the first compounding period. For the next period, you start with $102, so 2% will be slightly more than $2. Since the balance of the account grows during each compounding period, the amount of interest added also increases. This cycle is compound interest.
Based on the way compound interest works, accounts with high interest will increase their balance quicker than those with low yields. To find great interest rates, check out our list of high-interest accounts.
Investment Return Compounding
The return you earn when investing in the stock market depends on the change in the value of your initial investment. When the value increases, you’ll earn a return.
Investment returns compound the same way that savings returns do. When you leave your money and returns in the stock market, they compound over time.
Investment returns vary significantly over time. Oftentimes, stock investment or mutual funds can decrease in value. However, over the course of time, a diversified portfolio tends to generate a 6%-7% annual return.
Allowing compound interest to run its course is a powerful strategy to fulfill long-term investment and savings goals.
It’s time to start earning compounding interest on your savings and investments! Check out our helpful list of the best savings accounts.