Savings Growth: The Eighth Wonder of the World
Albert Einstein reportedly called compound interest the "eighth wonder of the world." He who understands it, earns it; he who doesn't, pays it. This calculator demonstrates how small, regular contributions can grow into a massive fortune over time.
Table of Contents
How Compound Interest Works
Simple interest is calculated only on your initial deposit. Compound interest is calculated on your initial deposit plus all the accumulated interest from previous periods. It's interest on interest.
Example: With $10,000 at 5% interest:
- Year 1: Earn $500. New Balance: $10,500.
- Year 2: Earn $525 (5% of $10,500). New Balance: $11,025.
- Year 30: Your money has more than quadrupled, even if you never added another cent.
The Time Value of Money
Time is your greatest asset. Investing $500/month starting at age 25 yields significantly more at age 60 than investing $1,000/month starting at age 45, simply because the money has more time to compound.
Why Frequency Matters
This calculator allows you to adjust the "Compounding Frequency." The more frequently interest is added (e.g., Daily vs. Annually), the faster your money grows. Most savings accounts compound monthly or daily.