The Comprehensive Guide to

Passive Income Investing


Learn the secrets of how Paul Tracy generates over $XXX,XXX per month in passive income!

How to Become Financially Independent Through Passive Income Investing

Use our compound savings calculator to see how much you should save each year in order to reach your financial goals.

How the Compound Savings Calculator Works

Let's look at an example. Say you're planning to buy a $10,000 car in 5 years. You think you can achieve a 2% return on your money each year. You would enter:

  • "$10,000" as the Goal Amount,

  • "5" as the Years to Goal, and

  • "2%" as the Annual Rate of Return

If you already have $1,000 saved up, enter "$1,000" as your Current Amount Saved.

If you start with $1,000 and save an additional $1,709.43 each year while earning 2.00% on your savings, you would have $10,000 within 5 years.

The Power of Compounding

If you save money consistently for a period of time while earning interest, you can easily take advantage of compounding. Let’s dive into the power of compounding below.

What is Compounding Interest?

Essentially, compound interest is earning interest on interest. In the case of a savings account, you would deposit your funds at regular intervals and the money in that account earns interest (either monthly or annually). This interest is added to your total amount in the account and therefore starts earning interest. It’s a great way to accumulate wealth over time.

How to Find the Best Savings Account Rate

The annual rate of return is dependent on the type of savings account you select. High-yield savings accounts and money market accounts typically offer a higher interest rate than a regular savings account (which can be as low as 0.25%).

How Do You Calculate Compound Interest?

The formula for compound interest is as follows:

A = P (1 + r⁄n ) nt

How to Calculate Compound Interest

P = initial principal (your deposit or “Current Amount Saved”
i = interest rate (the interest rate offered by the savings account)
t = number of time periods elapsed (how long your plan to save)
n = number of times the money is compounded per year (annually or monthly)
A = final amount, including the initial principal and all interest earned over n years

Or, use our simple compound savings calculator above.