1. What is Compound Interest with Monthly Deposits?

This calculator computes the future value of regular monthly deposits with compound interest. It shows how consistent savings can grow over time through the power of compounding.

2. How Does the Calculator Work?

The calculator uses the compound interest formula with regular deposits:

Where:

• \( A \) — Future value of the investment (USD)
• \( PMT \) — Monthly deposit amount (USD)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time in years

Explanation: The formula accounts for monthly compounding (12 periods per year) and regular monthly contributions.

3. Importance of Regular Deposits

Details: Regular monthly deposits significantly boost investment growth through dollar-cost averaging and compounding effects over long periods.

4. Using the Calculator

Tips: Enter monthly deposit in USD, annual interest rate as a percentage (e.g., 5 for 5%), and time period in years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: How does compounding frequency affect results?
A: More frequent compounding (monthly vs. annually) yields higher returns due to interest being calculated on interest more often.

Q2: What's the difference between this and simple interest?
A: Compound interest earns interest on both principal and accumulated interest, while simple interest only earns on the principal.

Q3: How important is the monthly deposit amount?
A: Even small monthly deposits can grow substantially over long periods due to compounding effects.

Q4: What's a realistic interest rate assumption?
A: Historical stock market returns average 7-10%, bonds 3-5%, savings accounts 1-3% annually.

Q5: How does inflation affect these calculations?
A: The results are nominal values. For real (inflation-adjusted) returns, subtract expected inflation from the interest rate.