$300,850.72
$130,000.00
$170,850.72
131%
of contributions
In 20 years, your $10,000.00 initial investment with $500.00/month contributions at 7% interest will grow to $300,850.72
| Year | Contributions | Interest | Balance |
|---|---|---|---|
| 1 | $6,000.00 | $919.19 | $16,919.19 |
| 2 | $12,000.00 | $2,338.58 | $24,338.58 |
| 3 | $18,000.00 | $4,294.31 | $32,294.31 |
| 4 | $24,000.00 | $6,825.16 | $40,825.16 |
| 5 | $30,000.00 | $9,972.70 | $49,972.70 |
| 6 | $36,000.00 | $13,781.53 | $59,781.53 |
| 7 | $42,000.00 | $18,299.43 | $70,299.43 |
| 8 | $48,000.00 | $23,577.68 | $81,577.68 |
| 9 | $54,000.00 | $29,671.22 | $93,671.22 |
| 10 | $60,000.00 | $36,639.02 | $106,639.02 |
| ... | |||
| 15 | $90,000.00 | $86,970.62 | $186,970.62 |
| ... | |||
| 20 | $120,000.00 | $170,850.72 | $300,850.72 |
See how starting at different ages affects your final balance (assuming retirement at 65):
Start at age 25
$1,475,520.81
40 years
Start at age 35
$691,150.47
30 years
Start at age 45
$300,850.72
20 years
Start at age 55
$106,639.02
10 years
The Power of Compound Interest
Time is Key
The earlier you start, the more time your money has to compound. Starting 10 years earlier can double your final amount.
Consistency Wins
Regular monthly contributions, even small ones, add up dramatically over time with compound growth.
Exponential Growth
Your earnings accelerate over time. Most compound growth happens in the later years of your investment.
Frequently Asked Questions
What is compound interest?
Compound interest is when you earn interest on both your original investment AND on the interest you've already earned. It's like a snowball rolling downhill - it gets bigger faster as it grows. Albert Einstein allegedly called it the 'eighth wonder of the world.'
How is compound interest different from simple interest?
Simple interest only calculates interest on your original principal. Compound interest calculates interest on your principal PLUS accumulated interest. Over long periods, compound interest significantly outperforms simple interest.
What's the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual interest rate. At 8% interest, your money doubles in about 9 years (72 ÷ 8 = 9).
How can I maximize compound interest?
Start early (time is your biggest advantage), contribute regularly, reinvest dividends, minimize fees, and choose investments with good long-term returns. Even small amounts invested early can grow significantly.
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