Compound Interest Calculator Monthly Investment

Compound Interest Formula:

\[ A = C \times \frac{(1 + \frac{r}{12})^{12 \times t} - 1}{\frac{r}{12}} \times (1 + \frac{r}{12}) \]

Future Value (A):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Monthly Compound Interest?

Monthly compound interest calculates the future value of regular monthly investments where interest is compounded monthly. This allows your money to grow faster as you earn interest on both your principal and accumulated interest.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = C \times \frac{(1 + \frac{r}{12})^{12 \times t} - 1}{\frac{r}{12}} \times (1 + \frac{r}{12}) \]

Where:

$ A $ — Future value ($)
$ C $ — Monthly investment amount ($)
$ r $ — Annual interest rate (decimal)
$ t $ — Time period in years

Explanation: The formula calculates the future value of monthly investments with monthly compounding, accounting for the fact that each monthly contribution compounds for a different period.

3. Importance of Monthly Compounding

Details: Monthly compounding significantly accelerates wealth accumulation compared to annual compounding. The more frequent the compounding, the faster your money grows due to the "interest on interest" effect.

4. Using the Calculator

Tips: Enter your monthly investment amount in dollars, annual interest rate as a percentage (e.g., 5 for 5%), and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does monthly compounding differ from annual compounding?
A: Monthly compounding calculates interest 12 times per year, while annual compounding calculates once. Monthly compounding yields higher returns due to more frequent interest calculations.

Q2: What's the difference between this and simple interest?
A: Simple interest only earns interest on the principal, while compound interest earns interest on both principal and accumulated interest.

Q3: How often should I make investments for maximum growth?
A: Regular monthly investments combined with monthly compounding provide optimal growth through dollar-cost averaging and frequent compounding.

Q4: Does this calculator account for taxes and fees?
A: No, this calculates gross returns. Actual returns may be lower due to taxes, investment fees, and other costs.

Q5: Can I use this for retirement planning?
A: Yes, this calculator is excellent for estimating retirement savings growth from regular monthly contributions.