Compound Interest Calculator
Calculate compound interest with monthly contributions. Visualize how fast your money grows and track the acceleration of your wealth over time.
The Magic of Compound Interest: Your FI Engine
Often called the "eighth wonder of the world," compound interest is the engine that powers your journey to Financial Independence. It's the concept of earning returns not just on your original investment (the principal), but also on the accumulated interest from previous periods.
Think of it like a snowball rolling downhill. As it rolls, it picks up more snow, becoming larger and larger. The bigger it gets, the more snow it collects with each rotation. Your money works the same way, growing at an ever-increasing rate over time. This calculator helps you visualize that powerful acceleration, turning your savings into a wealth-generating machine.
How to Use This Calculator
Chart Your Course to FI
Enter your starting investment (your current FI fund), how much you plan to contribute monthly (fuel for your FI rocket), and your expected real rate of return (after inflation).
Fuel Your Growth Engine
Set your investment timeline in years. This is the period you'll be actively saving and letting your investments compound before you consider retiring early.
Visualize Your Freedom
The chart instantly reveals your wealth's growth trajectory. The steepening curve is the magic of compounding at work, accelerating you towards your FI number and financial freedom!
Compounding: The Cornerstone of FI
The Financial Independence movement is built on the foundation of compound interest. Letting your money make money.
The Snowball Effect
Initially, your growth comes from contributions. But eventually, the interest earned exceeds your annual contribution. That's the tipping point.
Rule of 72
A mental shortcut: Divide 72 by your interest rate to see how many years it takes to double your money. at 7%, it doubles every ~10 years.
Time in Market
Starting early is more powerful than saving more. Investing $500/mo starting at 25 yields more than $1000/mo starting at 35.
Inflation Drag
Remember to use 'Real Return' (after inflation). A 10% nominal return might only be 7% purchasing power growth.
Take Your Plan to the Next Level
This calculator is just one piece of the puzzle. Use our full Financial Independence Simulator to unite your income, investments, and expenses into a single, interactive roadmap.
Your Savings Rate: The Most Powerful Lever
Curious about how your savings rate directly impacts your time to FI?
Frequently Asked Questions
Compound interest is the 'interest on your interest.' It's the process where the interest you earn is added back to your principal, and future interest calculations are based on this new, larger amount. This creates a snowball effect, causing your wealth to grow at an accelerating rate.
Simple interest is only calculated on the original principal amount. With compound interest, you earn returns on the principal plus all the accumulated interest from previous periods, leading to significantly greater growth over the long term.
The Rule of 72 is a quick mental shortcut to estimate how many years it will take for an investment to double. Simply divide 72 by your annual interest rate. For example, at an 8% annual return, your money will roughly double every 9 years (72 / 8 = 9).
While past performance isn't indicative of future results, the historical average annual return of the S&P 500 (a common benchmark for the US stock market) has been around 10% before inflation. A conservative estimate, after accounting for inflation (a 'real return'), might be 7-8%. It's wise to experiment with different rates in the calculator to see a range of potential outcomes.
The 4% Rule is a guideline used for retirement planning that suggests you can safely withdraw 4% of your investment portfolio in your first year of retirement, and then adjust that amount for inflation each subsequent year, with a high probability of your money lasting for at least 30 years. Your 'FI Number' is the total portfolio value you need to achieve this. You can calculate it by multiplying your desired annual retirement income by 25 (since 1 / 0.04 = 25). For example, if you want to live on $40,000 a year, your FI Number would be $1,000,000.