Compound Interest Calculator With Recurring Investments

Compound Interest Formula:

\[ A = P \times (1 + r)^k + PMT \times \frac{(1 + r)^k - 1}{r} \]

Initial Amount (P):

Interest Rate (r):

% per period

Number of Periods (k):

periods

Recurring Investment (PMT):

$ per period

Future Amount (A):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Compound Interest With Recurring Investments?

Compound interest with recurring investments calculates the future value of an investment that earns interest on both the initial principal and the accumulated interest from previous periods, while also adding regular contributions at each compounding period.

2. How Does the Calculator Work?

The calculator uses the compound interest formula with recurring investments:

\[ A = P \times (1 + r)^k + PMT \times \frac{(1 + r)^k - 1}{r} \]

Where:

$ A $ — Future amount
$ P $ — Initial principal amount
$ r $ — Interest rate per period (as a decimal)
$ k $ — Number of compounding periods
$ PMT $ — Recurring investment amount per period

Explanation: The formula calculates the growth of your initial investment plus the accumulated value of regular contributions, with all amounts earning compound interest.

3. Importance of Compound Interest Calculation

Details: Understanding compound interest with regular investments helps in financial planning, retirement savings, and investment strategy. It demonstrates how regular contributions can significantly accelerate wealth accumulation over time.

4. Using the Calculator

Tips: Enter the initial investment amount, interest rate (as a percentage), number of periods, and regular investment amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How often should interest compound?
A: The more frequently interest compounds, the faster your money grows. Common compounding periods include annually, semi-annually, quarterly, or monthly.

Q2: What's the difference between this and simple compound interest?
A: This formula includes regular contributions (PMT), whereas simple compound interest only calculates growth on the initial principal.

Q3: Can I use this for different compounding frequencies?
A: Yes, but you must adjust the interest rate and number of periods to match your compounding frequency (e.g., for monthly compounding, use monthly rate and total months).

Q4: What if I make contributions at the beginning vs end of each period?
A: This formula assumes contributions are made at the end of each period. For beginning-of-period contributions, the formula would be slightly different.

Q5: How does this apply to retirement planning?
A: This calculation is essential for retirement planning as it shows how regular contributions to retirement accounts can grow significantly over time due to compound interest.