## Using the Compound Interest Calculator

**Why did I develop the Compound Interest Calculator? **The compound interest effect is an important helper when it comes to long-term wealth accumulation. This is known to many people. What is less known is the actual strength of this muscle over long periods of time. With the compound interest calculator, just a few entries make it clear how strong the compound interest effect actually is.

In order to be able to fully benefit from compound interest **patience **and **discipline** of crucial importance. After all, the effect only works if received interest or dividends are not withdrawn. If you take the interest, only the simple interest effect works.

## The compound interest calculator: how it works

The compound interest calculator is kept simple and gets by with just a few details. For this reason, the following assumptions were made when creating the calculator:

- Subsequent interest, ie interest is only paid on the paid-in capital at the end of the month.
- Monthly Interest: Interest is calculated every month.

** If other calculation methods are desired: Write a comment! **

### input from **seed capital **in the compound interest calculator

How much money do you already have available today? You enter the value in the field **seed capital** a. You haven't saved any seed capital yet? No problem. Enter a 0 in the field.

### input from **monthly savings rate** in the compound interest calculator

If you're just starting out investing, your monthly savings rate (rough rule of thumb) should be at least 10 % of your net income.

The monthly savings rate is an effective way to increase your invested capital by x euros every month. Contrary to popular belief, even small amounts over a period of, say, 30 years and 5 % interest can have a big effect. Try it out!

A long period of time is particularly important for the compound interest effect. This is the only way it can come into its own.

### Default one **annual interest rate **in the compound interest calculator

Since the interest rate for investments in shares and ETFs is not known in advance, assumptions have to be made here. However, delivered the DAX since 1987 has had a historical average return of over 7 %.

Play around with the interest rate. You will quickly find that it is the most powerful adjusting screw. Over a period of 30 years, the compound interest effect has such a strong effect that it can hardly be offset by a higher monthly savings rate.

### Entering the **Saving duration in years**

How many years should the capital work for you? Enter it here! For short periods of ten years and less, you will find that your capital is largely made up of your own deposits. This changes drastically the longer the investment horizon becomes. Over 30 years, interest payments make up the majority of the money. So your invested capital with 5 % interest and 30 years term is only 43 % of the final capital.

I hope the compound interest calculator will help you. You have an addition, want another computer, or have discovered an error? Leave a comment!

## The compound interest calculator in the application

Of the** Compound Interest Calculator **clarifies that the compound interest effect is a strong muscle of your investment. In particular, the effect of compound interest has a strong impact on long periods of 15 years or more. If you reinvest interest payments or stock dividends over a longer period of time, you can accumulate wealth faster because the compound interest effect helps you. In addition to a long investment horizon, the right stock portfolio is also made of one Stock portfolio comparison essential in order to be able to fully utilize the compound interest effect. You can use compound interest with a simple "Slipper portfolio“ take advantage, right Robo Advisor to use. However, the latter have slightly higher fees, which slightly reduces your return.

Of course, the compound interest effect runs against you as a debtor. Therefore, avoid taking out unnecessary loans and pay attention credit comparison on this reported effective interest. In this way you can avoid expensive cost traps.