Compound Interest Calculator

Compound interest is often called the eighth wonder of the world, and for good reason. The core formula is A = P(1 + r/n)^(nt), where P is the principal, r is the annual rate, n is the compounding frequency, and t is time in years. What makes this formula so powerful is the exponential nature of growth — as your balance increases, each compounding period generates more interest than the last, creating a snowball effect that accelerates over time.

Historical Stock Market Returns

The S&P 500 has delivered an average annual return of approximately 10% over the past century, or about 7% after adjusting for inflation. While individual years vary dramatically — from a 47% gain in 1954 to a 37% loss in 2008 — the long-term trend has consistently rewarded patient investors. A single $10,000 investment in the S&P 500 in 1980 would be worth over $1 million today, demonstrating the immense power of compounding over decades.

Why Starting Early Matters Most

The most critical variable in compound growth is time. An investor who contributes $500 per month starting at age 25 will accumulate roughly $1.75 million by age 65 at an 8% return. Waiting just 10 years to start reduces that number to about $745,000 — despite contributing only $60,000 less in total. This is because the earliest dollars invested have the most time to compound and multiply, making each year of delay disproportionately costly. The best time to start investing was yesterday; the second best time is today.