Simple idea, powerful effect
With compounding, interest or returns added to a balance can themselves participate in future growth. Over long periods, this can create a widening difference compared with growth calculated only on the original principal.
What affects the result?
The starting principal, rate, time, compounding frequency, contributions and withdrawals all influence a projection. For investments, assumed returns are not guaranteed and actual results can vary substantially.
Time matters
Because each period can build on previous periods, additional time can have a large effect on projected growth. This is one reason consistent early saving is often emphasized in long-term planning.
Do not ignore inflation and risk
A nominal future balance does not tell you what that money will buy, and investment returns can be negative. Use compound-growth calculations as scenarios rather than promises.
Try different assumptions with the Compound Interest Calculator.
Examples and calculator projections are educational and do not predict future investment returns.