Planning Your Investments With a Simple Interest Calculator

Investing is an example of literally having your money work for you. Investing in one aspect of business (the initial investment being called the principal) means that a percentage of the initial investment is added to the principal after every certain intervals, the results of which allows your money to grow without the need to do anything else. The greater the total amount invested, the greater the amount of money earned through the compounding of interest. A person who invests millions of dollars therefore, stands a chance of earning a substantial amount of money every month. This further increases as the total amount grows. For people who would like to know the amount of money that they could earn within any given amount of time, a simple interest calculator is used.

The premises of the simple interest calculator are very easy to understand- it merely calculates the total costs of interest after a specified amount of time. People often avail of this tool to gauge how money they could earn within a time frame, and to compare different investment plans of varying interest rates to determine which plan they should use in order to earn the most amount of money in the shortest amount of time. Likewise, the simple interest calculator is also used for those who are borrowing money from a loan, and would like to calculate the total amount that they would need to repay their lenders after a certain time has elapsed.

In order to figure out potential earnings, the simple interest calculator will require you to input certain values into it before it can make its calculations. Generally, the calculator will first ask you for the principal amount you wish to invest in. this is the money that you first put into the investment that has yet to return any interest. Following this, the calculator will now require you to input the interest rate that comes with the investment. Interest rates are generally the percentage of the principal amount that you can earn for every specified interval. Most interest rates are offered either on a monthly, semi-annually, or annually basis. Lastly, the calculator will now ask you the length of time you would like to maintain the investment. This is the specified time after which will give you the total amount you have earned.

Interest is calculated by multiplying the principal with the interest rate, and then multiplying again with the number of years or months the investment is maintained. As an example, if you wish to invest $1000 in a plan that offers an annual interest rate of 2%, and plan to keep the investment for 3 years, then $1000 multiplied by 2% (or.02) multiplied by 3 would then give you a total of $60 interest. This would give you a total of $1060 all in all. If you choose to keep this sum in the investment plan for another three years with the same interest rates, then the interest would be $63, and the total investment would be $1123.60.

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