Interest Calculator
Calculate how your investments grow with interest, regular contributions, taxes, inflation and real buying power
The amount you start with
Annual interest rate
Applied to interest earnings
For purchasing power
Nominal Returns (No Inflation Adjustment)
Ending Balance
$54,535.20
Total Interest Earned
$9,535.20
Total Invested
$45,000.00
Return %
21.2%
Breakdown:
Inflation Impact Analysis
Buying Power (Today's Dollars)
$47,042.54
Purchasing Power Lost
$7,492.66
Real Gain (After Inflation)
$2,042.54
Real Return %
4.5%
Analysis:
Yearly Breakdown
| Year | Deposit | Interest | Ending Balance |
|---|---|---|---|
| 1 | $25,000.00 | $1,250.00 | $26,250.00 |
| 2 | $5,000.00 | $1,562.50 | $32,812.50 |
| 3 | $5,000.00 | $1,890.63 | $39,703.13 |
| 4 | $5,000.00 | $2,235.16 | $46,938.28 |
| 5 | $5,000.00 | $2,596.91 | $54,535.20 |
Investment Summary
Final Amount
$54,535.20
After 5 years
Total Gained
$9,535.20
21.2% return
Real Value (After Inflation)
$47,042.54
In today's dollars
Frequently Asked Questions
What is compound interest?
Compound interest is the interest earned on both the principal amount and previously earned interest. It's often called "interest on interest" and is the most common type of interest calculation in savings accounts, investments, and loans. The formula is: A = P(1 + r/n)^(nt), where A is the final amount, P is principal, r is the annual rate, n is compounding frequency, and t is time in years.
How often does interest compound?
Interest can compound at different frequencies: annually (once per year), semiannually (twice per year), quarterly (4 times per year), monthly (12 times per year), daily (365 times per year), or continuously. More frequent compounding results in slightly higher returns because interest is calculated and added more often, allowing subsequent interest calculations to include the previously earned interest.
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal amount and doesn't include previously earned interest. The formula is I = P × r × t. Compound interest is calculated on both the principal and accumulated interest. For example, $1,000 at 10% for 2 years earns $200 simple interest but $210 with annual compounding.
How does inflation affect my investments?
Inflation reduces the purchasing power of your money over time. If inflation is 3% and your investment returns 5%, your real return is approximately 2%. This calculator shows your "buying power" after inflation adjustment, which represents what your final balance can actually purchase in today's dollars. It's important to earn returns that exceed inflation to truly grow your wealth.
Should I contribute at the beginning or end of the period?
Contributing at the beginning of each period (beginning of month/year) generally results in slightly higher returns because your contributions have more time to earn interest. If contributions are made at the end of the period, they have one less compounding period to grow. The difference increases with longer time periods and higher interest rates.
How does tax affect my interest earnings?
Interest income is typically taxable. Your tax rate depends on your income level and jurisdiction. This calculator applies your tax rate to the interest earned each period, reducing your effective return. For example, if you earn 5% interest with a 25% tax rate, your after-tax return is approximately 3.75%. Some accounts like 401(k)s and IRAs offer tax advantages.
Pro Tips
- • Start investing early - the power of compound interest means that even small amounts invested early can grow significantly over time.
- • Increase contributions regularly - try to increase your annual or monthly contributions over time to accelerate growth toward your financial goals.
- • Choose accounts wisely - maximize tax-advantaged accounts like 401(k)s and Roth IRAs to reduce taxes on your investment earnings.
- • Monitor your inflation rate - aim for investment returns that exceed your local inflation rate to ensure your wealth grows in real terms, not just nominal terms.
Update Logs
View the latest updates and features