Compound Savings Calculator
Consistent investments over a number of years can be an effective
strategy to accumulate wealth. Even small additions to your savings add
up over time. This calculator demonstrates how to put this savings
strategy to work for you!
Definitions
Starting amount
The starting balance or current amount you have invested or saved.
Years / months
The total number of years, weeks, months, periods, etc. you are planning to save or invest.
Additional contributions
The amount that you plan on adding to your savings or investment each
period. The investment period options include weekly, bi-weekly,
monthly, quarterly and annually. This calculator assumes that you make
your contributions at the beginning of each period.
Rate of return
The annual rate of return for this investment or savings account. The
actual rate of return is largely dependent on the type of investments
you select. For example, from December 1999 to December 2009, the
average annual compounded rate of return for the S&P 500 was -0.6%,
including reinvestment of dividends. From January 1970 to December
2009, the average annual compounded rate of return for the S&P 500,
including reinvestment of dividends, was approximately 10.1% (source:
www.standardandpoors.com). Since 1970, the highest 12-month return was
61% (June 1982 through June 1983). The lowest 12-month return was -43%
(March 2008 to March 2009). Savings accounts at a bank may pay as
little as 1% or less but carry significantly lower risk of loss of
principal balances.
It is important to remember that these scenarios
are hypothetical and that future rates of return can't be predicted
with certainty and that investments that pay higher rates of return are
generally subject to higher risk and volatility. The actual rate of
return on investments can vary widely over time, especially for
long-term investments. This includes the potential loss of principal on
your investment. It is not possible to invest directly in an index and
the compounded rate of return noted above does not reflect sales
charges and other fees that funds and/or investment companies may
charge.
Compounding
Earnings on an investment's earnings, plus previous interest. This
calculator allows you to choose the frequency that your investment's
interest or income is added to your account. The more frequently this
occurs, the sooner your accumulated earnings will generate additional
earnings. For stock and mutual fund investments, you should usually
choose 'Annual'. For savings accounts and CDs, all of the options are
valid, although you will need to check with your financial institution
to find out how often interest is being compounded on your particular
investment.
Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
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