About Compound Interest

Compound interest is often called the "eighth wonder of the world". Unlike simple interest, where you only earn money on your principal, compound interest allows you to earn interest on the interest you've already accumulated. This effect causes your wealth to grow exponentially over time.

How to use this Advanced Calculator?

This tool is designed for investors, savers, and financial planners. Here is how to make the most of it:

• Principal: The starting amount of money.
• Contribution: Money added regularly (e.g., monthly salary savings).
• Inflation Adjustment: (Advanced) See what your money is worth in today's purchasing power.
• Tax Deduction: (Advanced) Calculate net returns after the government takes its share.

Formula Used

We use the standard compound interest formula adapted for monthly contributions:
A = P(1 + r/n)^(nt) + PMT × (((1 + r/n)^(nt) - 1) / (r/n))

Where:
A = Future value
P = Principal amount
r = Annual interest rate (decimal)
n = Number of compounding periods per year
t = Time in years
PMT = Monthly contribution

Tips for Better Results

1. Start early: The power of compounding works best over longer periods.
2. Be consistent: Regular contributions, even small ones, add up significantly.
3. Reinvest earnings: Allow your interest to compound by not withdrawing it.
4. Adjust for reality: Use the inflation and tax settings for more accurate projections.