If you’re looking to consistently create wealth, the key ingredient isn’t stock-picking or a complex budgeting system but it’s the time.

The legendary investor Warren Buffett has called compound interest an best friend. After all, it expands at a higher rate than ordinary interest because it pays dividends not just on your initial investment but also on the interest that you accumulate in addition. Furthermore, the longer your investment grows in value, the more interest it could earn.

To demonstrate the potential of compound interest, below is a list of free compound interest calculators accessible online to find out how your money will grow in various circumstances.

## 6 Free Compound Interest Calculators Online

### 1. Money Geek Compound Interest Calculator

Compound interest is the formal name for the snowball effect in finance, where an initial amount grows upon itself and gains more and more momentum over time. It is a powerful tool that can work in your favor when saving, or prolonging repayment for debts. Compound interest is often referred to as “interest on interest” because interest accrued is reinvested or compounded along with your principal balance. It is the interest earned on both the initial sum combined with interest earned on already accrued returns. Link to MoneyGeek

### 2. Nerd Wallet Compound Interest Calculator

For savers, the definition of compound interest is basic: It’s the interest you earn on both your original money and on the interest you keep accumulating. Compound interest allows your savings to grow faster over time.

In an account that pays compound interest, such as a standard savings account, the return gets added to the original principal at the end of every compounding period, typically daily or monthly. Each time interest is calculated and added to the account, the larger balance earns more interest, resulting in higher yields.

For example, if you put $10,000 into a savings account with a 0.50% annual yield, compounded daily, you’d earn $51 interest in the first and second years, and $53 in the third year. After 10 years of compounding, you would have earned a total of $513 in interest. Link to Nerd Wallet

### 3. Bank Rate Compound Interest Calculator

Consistent investing over a long period of time can be an effective strategy to accumulate wealth. Even small deposits to a savings account can add up over time. The Bankrate Compound Interest Calculator demonstrates how to put this savings strategy to work. Link to Bankrate

### 4. Financial Mentor Compound Interest Calculator

This compound interest calculator has more features than most. You can vary both the deposit intervals and the compounding intervals from daily to annually (and everything in between)

This flexibility allows you to calculate and compare the expected interest earnings on various investment scenarios so that you know if an 8% return, compounded daily is better than a 9% return, compounded annually.

It’s simple to use. Just enter your beginning balance, the regular deposit amount at any specified interval, the interest rate, the compounding interval, and the number of years you expect to allow your investment to grow. Link to Financial Mentor

### 5. CNBC Compound Interest Calculator

To illustrate the power of compound interest, here’s a calculator you can use to see how your money might grow under different circumstances.

You can try out varied contribution amounts at different average interest rates over a wide range of time. Simply punch in your desired numbers and run the calculation. Link to CNBC

### 6. Calculator.net Compound Interest Calculator

Our Interest Calculator can help determine the interest payments and final balances on not only fixed principal amounts but also additional periodic contributions. There are also optional factors available for consideration, such as the tax on interest income and inflation. Link to Compound Interest Calculator

## What Is Compound Interest?

Compound interest, also known as compounding interest, is the interest accrued from the principal amount of the bank account or investment and any interest accrued from the previous period of earning. It is also referred to in the form of “interest on interest” because when investors decide to hold the interest accrued in their accounts instead of withdrawing it, the interest is incorporated into the principal and can earn additional interest.

Its rate of interest at which it accumulates is called the annual equivalent rate, also known as the Annual percent yield (APY). It is determined by the time of compounding or the period during the year that compounded interest is capitalized or credited to the principal. The compounding period’s length depends on the type of compounding: it could be monthly compounding, annually, or semi-annual. The latter is usually used when using CDs. (CD).

### 4 Ways to Calculate Compound Interest

There are a variety of methods to calculate compound interest, which include:

**The compound interest formula** The formula for compound interest can be used to calculate various mathematical formulas calculate compound interest. One of the most simple formulas used to calculate interest is the standard formula A = (PV(1+i)n + (P). In this formula, “A” is the final value, “PV” is the actual price of principal, the “i” is the interest rate expressed in decimal percentage, and the “n” is the number of times interest will increase. To calculate the interest rate, simply add one percentage of interest, multiply the percentage you have added by the time, and multiply the result by the present value to determine the annual rate. Finally, add the year’s return to the principal to calculate your compound rate.

**Calculator for compound interest** Numerous calculators, both hand-held models, and computer-based programs, have exponent functions to aid in the calculation of the compound rate of interest. There are also online calculators, like one run through the U.S. Securities and Exchange Commission.

**Spreadsheets**: Spreadsheet applications generally can calculate a future value which investors can use for calculating compound interest. The future value represents the monetary value of a particular amount that is due later that determines the value of the investment principally by accumulating interest and interest payment.

**The rule of 72** is a basic formula that can be used to calculate the number of years required to double the value of an amount of money by dividing the interest rate by 72. For instance, if the return rate is 5 percent, an investment would double in about fourteen years (72/5 = 14.4).

## Simple Interest Vs. Compound Interest

Simple interest occurs when interest is earned only from the amount of principal. In this case, the interest earned isn’t invested. If you could earn 10% interest per year on $100, as an example, the amount you would earn each year is $10. At the close of the year, you’d be left with $110: the $100 initial plus the interest of $10. In two years, you’d be left with $120. After 20 years, you’d be able to count $300.

Compound interest is, in contrast, a way to put that $10 interest to work to earn more in the second year, rather than earning interest only on the $100 principal and earning interest on $110, which means that your balance at the end of two years is now $121. Although this may seem like a minor variation at first, it will increase significantly when multiplied with time. After 20 years, your amount invested will be $373 instead of $300 with simple interest.

It is possible to use compound interest to help you save money more quickly; however, if you’re paying the compound interest of the debts you owe, you’ll be losing money faster. Interest can compound daily, monthly, or even on a year-long basis. The more often the amount is compounded, the more it will increase.

## The best ways to earn interest

### Compounding Interest

If you can reinvest the interest earned from bonds, you will profit from the compounding interest. This means you will get interested both in your initial investment and the previous interest payments. In time, the total interest earned could be significantly higher if it uses compounding.

If you can reinvest profits, this method can be a great method to earn interest.

### Laddering Bond Maturities

A bond laddering allows you to invest the profits from bond maturities every couple of years. The bonds are laddered as they have different maturities. This method means that the bonds within the portfolio are mature after a few years. The earnings from each bond that matures are put back into the portfolio at current interest rates.

A portfolio that can take advantage of laddered maturities could help reduce the risk of interest rates for your investments. This is the possibility that your investment price could change when interest rates fluctuate. For example, in the context of rising interest rates, you can expect that the worth of your bonds portfolio may fall.

### Mutual Fund Breakpoints

If you are investing with mutual funds, you could have to pay sales fees when you invest in the fund. If you invest in bond mutual funds and want to increase your interest rate, you can utilize breakpoints to increase your interest earnings. Breakpoint to boost the amount of interest earned. Breakpoints are an amount of discount you earn by buying a range of mutual funds from that same family of funds. If you buy within the same family, you could get a discount on costs for sales.

### Online Savings Accounts

You could be able to increase the amount of interest you earn with the internet as a savings bank account. Certain banks can offer higher rates due to their costs being less than traditional banks. They operate on an online commercial structure that is not dependent on physical locations for banks. Since these banks possess lower fixed costs of operations, they can provide more favorable saving rates as well as lower balances.

### Other Banking Relationships

If you’re in business with a bank institution, it could be willing to negotiate a better rate of interest for the private savings account or your savings account. Consider, for instance, that you’ve taken out an enterprise loan from the bank for a number of years. Since you’ve established a track record of being a reliable client, the banker is likely to want to keep an excellent relationship with you. Make use of that relationship to obtain an increased interest rate on your bank accounts.

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