Compound Growth Calculator
Investment Growth Calculator
Estimate the future value of your savings with monthly compounding.
Report Bug Compound growth is the financial force that turns small, consistent habits into massive wealth. Unlike "Simple Interest," where your money grows in a straight line, Compound Growth is exponential—your interest earns interest, and that new interest earns even more interest. The Compound Growth Calculator helps you visualize this "Hockey Stick" curve, proving that the length of time you invest is often more critical than the amount you invest.
Whether you are maxing out your Roth IRA or reinvesting dividends in the S&P 500, this tool reveals the future potential of your patience.
🌱 The Exponential Formula (Future Value)
The math behind retirement planning relies on the Future Value of a Series formula. This accounts for both your starting principal and your regular monthly additions:
Variables Defined:
- FV: Future Value (What you will have).
- P: Initial Principal (Starting amount).
- PMT: Periodic Payment (Monthly contribution).
- r: Periodic Rate (Annual Rate / 12).
🏔️ Scenario: The "Snowball Effect" (The First $100k)
Legendary investor Charlie Munger famously said, "The first $100,000 is a bitch, but you gotta do it." Let's test this theory. We will simulate an investor saving $10,000/year (~$833/mo) with an 8% Annual Return.
Strategic Insight: Notice how the first step took nearly 8 years, but the jump from $300k to $400k took only 2.5 years? This is why starting early is the ultimate cheat code in investing.
Key US Investment Vehicles
- 401(k) Match: This is literally "free money." If your employer matches 50% of your contribution, you are getting an immediate 50% return on investment before compounding even starts. Always max this out first.
- Roth IRA: You pay taxes now, but your compound growth is Tax-Free forever. This is powerful for young investors who expect to be in a higher tax bracket later.
- S&P 500 Index Funds: The standard benchmark for US growth. Historically, it has returned about 10% annually (7% after inflation) over long periods.
Frequently Asked Questions (FAQs)
What is a realistic rate of return to use?
For a diversified stock portfolio (like the S&P 500), financial planners often use 7% to 8%. This accounts for inflation. If you want "Nominal" returns (the number on the screen), use 10%. For safer bonds/HYSA, use 4-5%.
What is CAGR?
Compound Annual Growth Rate (CAGR) is the "smoothed out" annual rate. The market might go up 20% one year and down 10% the next. CAGR tells you the steady rate that would have taken you from the starting balance to the ending balance.
Does compounding work for short periods?
Not really. Compounding needs time to be effective. Over 1 or 2 years, your gains are mostly linear. The "Magic" of the exponential curve typically becomes visible after year 7 or 10.
How does inflation affect my growth?
Inflation is the invisible tax. If your portfolio grows by 8% but inflation is 3%, your "Real Rate of Return" is only 5%. This calculator allows you to adjust for inflation to see what your money will actually buy in the future.
What is the "Rule of 72"?
It is a mental math shortcut. Divide 72 by your expected interest rate to see how many years it takes to double your money.
Example: at 8% return, 72 / 8 = 9 years to double.
