Using an Interest Calculator to Compute Compound Interest

A person who has a financial goal to save a certain amount of money in a designated period can use a free online interest calculator in order to calculate potential future savings. The only thing a person needs to do in order to accumulate additional money in a savings account is to deposit money in an interest-bearing account, and then use an interest calculator to stay focused on the goal. Compound interest adds even more money to the savings account.

People can literally grow their earnings

Compound interest is similar to a seed, and the seed grows more easily when a saver uses an interest calculator. A person plants seeds in a vegetable garden, waters the seeds, and the seeds eventually grow into edible vegetables. A person who receives compound interest in a savings account receives both interest and compound interest. When the interest posts to a person’s savings account, the person has additional savings, and these additional savings receive interest (compound interest). In other words, the principle receives interest, and the posted interest amount receives interest.

Use a free online interest calculator to view possible future results of saving money

Anyone can use an online interest calculator in order to figure out how money can grow in the future. An interest calculator allows the individual to calculate various amounts in order to see possible results long-term results. For instance, if a person invests $100.00, he or she enters this amount into the interest calculator. The person needs to enter the amount of interest and the expected number of years to achieve growth of the savings. The interest calculator then does the rest of the work.

The art of saving money on a regular basis

Saving money is somewhat of an art because it takes a certain amount of dedication and commitment for a person to save money on a regular basis. The idea is for the saver to put aside a specific amount of money each time he or she receives a paycheck. If the person receives a paycheck from a job every week, then the individual saves a certain amount of money in an interest-bearing account every week. If the person receives a paycheck once a month, he or she chooses a designated amount of money to save each month. A saver needs to save money regularly, even during financially difficult times, and even if the amount is only $1.00. The idea is to develop a habit that never wavers.

Create a budget to determine the amount of money to save

The way to know how much money to save is to create a budget. Current expenses determine the budget, so the person who wants to save money first needs to know how much money he or she spends. Expenditures include inexpensive items such as chewing gum and expensive items such as shoes and clothes. The person also needs to calculate monthly bills that include the rent or mortgage payments, telephone bills and utility services.

Eliminate some of the unnecessary expenses

A person can save more money than he or she thinks is possible by the elimination of unnecessary expenses. An individual may think that he or she must have cable television when, in fact, this is not really the case. Some locations are able to receive digital stations free of any charges, and larger, metropolitan areas have dozens of free digital stations, including a few movie channels.

Kick unhealthy habits to save more money

If a smoker can succeed in eliminating the need to smoke cigarettes, this one act can help the individual to save bundles of money every month because cigarettes are not cheap. A budget needs to include the items and services that a person actually needs, and eliminate those products and services that are luxury items. The creation of a budget is an easy task for some persons, but it is extremely difficult for others. It takes a great deal of discipline to save money.

Reinvest dividends

An investor who owns stocks, bonds or mutual funds may have the option to reinvest all of the dividends. Reinvesting dividends also creates compound interest on the reinvested amounts. Mutual funds receive dividends at different times. Some mutual funds pay out dividends every month. This is typical of bond funds. Others pay out dividends quarterly. Some funds only pay dividends once a year.

Invest in mutual funds that pay out frequent dividends in order to earn more compound interest

If a person wants to earn dividends and wishes to receive compound interest on the dividends, the individual needs to choose a fund that pays dividends frequently. Every time the fund received dividends, these dividends then receive compound interest. Some investors do not reinvest their dividends. Instead, they prefer to receive cash payments or checks. This method does not permit the person to receive any compound interest on savings. This is why financial experts typically advise investors to reinvest their dividends.

A person can choose to reinvest mutual fund dividends in another mutual fund

An investor does not necessarily need to reinvest the dividends in the same mutual fund. The option to reinvest the dividends in a different fund can add more fun to the art of investing and receiving compound interest. For instance, a person can own a bond fund in which he or she receives dividends on a monthly basis, and opt to reinvest those monthly dividends in an aggressive stock fund, or vice versa.

Anyone who wants to save money can achieve a certain measure of success, and an interest calculator is a handy tool that a person can use as needed. Calculating interest on an online interest calculator is easy, and an online interest calculator can help a person to keep on track with his or her financial goals. An individual may achieve so much success at saving money that he or she is able to add even more money to a savings account, and the saver can then calculate the compound interest on these additional savings by using an interest calculator.

Great Video Explaining Compound Interest

Salman Khan, founder of the Khan Academy, provides this great video quickly explaining compound interest and how it works.  I’m sure you’ll find this informative.  Enjoy the video!

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