If you're looking to grow your money, you may have heard of compound interest. Compound interest is when the interest earned on an investment is added to the principal amount, and then the interest is calculated on the new amount. This means that your money can grow faster over time.
But how do you know how much your money can grow with compound interest? That's where a compound interest calculator comes in. In this article, we'll show you how to use NerdWallet's compound interest calculator to determine your potential earnings.
First, let's define some key terms. The principal is the initial amount of money you invest. The interest rate is the percentage of the principal that you earn as interest each year. The compounding frequency is how often the interest is added to the principal. The time period is the length of time that you plan to invest your money.
To use NerdWallet's compound interest calculator, you'll need to input these four values. Let's say you have $10,000 to invest, and you want to invest it for 10 years. You've found an investment that offers a 5% interest rate, compounded annually. Here's how to use the calculator:
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Go to NerdWallet's compound interest calculator.
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Enter $10,000 as the principal.
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Enter 5% as the interest rate.
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Enter 1 as the compounding frequency (since the interest is compounded annually).
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Enter 10 as the time period.
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Click "Calculate."
The calculator will show you that after 10 years, your investment will be worth $16,386.16. That's an earnings of $6,386.16, or a 63.86% return on your investment.
Now that you know how to use a compound interest calculator, you can experiment with different interest rates, compounding frequencies, and time periods to see how much your money can grow. Keep in mind that the longer you invest your money, the more it can grow with compound interest.
Compound interest calculators aren't just useful for investments. You can also use them to calculate interest on loans and credit cards. For example, if you have a $10,000 loan with a 5% interest rate, compounded annually, and you want to pay it off in 5 years, you can use a loan interest calculator to see how much interest you'll owe each month and over the life of your loan.
Another useful calculator is the home affordability calculator. This tool can help you estimate how much home you can afford based on your income, debt, and other factors.
If you're carrying a balance on a credit card, you can use Forbes Advisor's credit card payoff calculator to find out how long it will take you to pay off your balance and how much interest you'll pay in the process. This can help you create a plan to pay off your debt faster and save money on interest.
If you're looking for a credit card that offers balance transfers, Forbes Advisor has a list of the best balance transfer credit cards. These cards allow you to transfer high-interest debt to a card with a lower interest rate, which can help you save money on interest and pay off your debt faster.
Finally, if you're looking for high-interest savings accounts or CDs, you can check out the latest rates on Bankrate.com. Today's best interest rates on CDs pay 4.74% and higher, depending on the term of the CD. Rates on savings accounts are also rising, so it's a good time to shop around for the best rates.
Overall, using a compound interest calculator can help you make informed decisions about your investments, loans, and credit cards. By understanding how compound interest works, you can maximize your earnings and save money on interest.
