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The power of compound interest!

Most of us would like to have a million dollars cash at some point in our life.  Most of us also work 40+ hours a week at our job (or jobs, whatever the case may be).  What little amount we save can and will accumulate over the years, but the odds of reaching the $1 million mark is relatively small.

However, if we take the power of compound interest, then we can begin to realize our $1 million goal:

For instance, let's say you decide to invest $100.00 per month in an investment that yields 6% interest compounded monthly, for the next 30 years.  In 30 years, you would have $100,451.50!  That's not too bad, considering you made $64,451.50 in interest (money you didn't have to begin with).  Now, let's say you kept that up another 10 years.  You would then have $199,149.06.  In 10 years, you almost double the value of your investment.

I find that teachers don't emphasize this enough in school.  If they illustrated this concept, then we may have more millionaires at 60 than we do now.  Think about it.  You're 18 years old.  You decide to invest $67.00 per month in an annuity that yields 12% compounded monthly.  You would have $1 million by the time you are 60.  Imagine retiring at 60 with $1 million in cash!  Even better.  Let's say you continued with the plan for just 5 more years.  Incredibly, you'd have $1,822,097.00!  In 5 years, you almost make another million!

Now, let's put this into practice.  Our annuities are compounded once a year.  The forms below allow you to input your own amounts:

Finding the future value of a one-time investment
Investment:
Interest rate:
# of times compounded each year:
# of years:
answer:

Finding the one-time investment needed to reach a desired future value
Desired future value:
Interest rate:
# of times compounded each year:
# of years:
answer:

Finding the # of years it will take to reach a desired future value
Desired future value:
Investment:
Interest rate:
# of times compounded each year:
answer:

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Now, let's go on to annuities.  Annuities are similar to one-time investments in all respects, except that you invest at regular intervals instead of just a one-time sum of money:

Finding the future value of an annuity
Investment per month:
Interest rate:
# of times compounded each year:
# of years:
answer:

Finding the investment per month needed in an annuity to reach a desired future value
Desired future value:
Interest rate:
# of times compounded each year:
# of years:
answer:

Finding the # of years it will take to reach a desired future value in an annuity
Desired future value:
Investment per month:
Interest rate:
# of times compounded each year:
answer:

The above forms assume that the investment earns a fixed rate of return (and does not take into account the usual 1st year bonus 1% many our annuities have) and is not subject to principal fluctuations. Many investments will fluctuate in value and this chart is for instructional purposes only and does not depict or predict the return on any specific investment.