Compound Interest Calculator
See how your money grows with compound interest. Add regular contributions, choose compounding frequency, and visualize growth over time.
| Year | Deposits | Interest | Balance |
|---|
Understanding Compound Interest
Albert Einstein is often credited with calling compound interest "the eighth wonder of the world." Whether or not he actually said it, the principle is powerful: money earns interest, and that interest earns its own interest, creating exponential growth over time. The earlier you start investing, the more dramatic the effect.
The Compound Interest Formula
For a lump-sum investment with no additional contributions, the formula is straightforward. P is your starting principal, r is the annual rate (as a decimal), n is the compounding frequency per year, and t is the number of years.
A = final amount · P = principal
r = annual rate · n = compounds/year · t = years
A = 10,000 × (1 + 0.07/12)^(12×20)
A = 10,000 × (1.005833)^240
A = 10,000 × 4.0387 = $40,387
You earned $30,387 in interest on a $10,000 investment.
The Power of Regular Contributions
Compound interest becomes even more powerful when combined with regular contributions. If you add $200/month to the example above, your balance after 20 years jumps from $40,387 to over $144,000 — with only $58,000 coming from your own deposits. The rest is compound interest doing the heavy lifting.
The Rule of 72
A quick shortcut to estimate doubling time: divide 72 by the annual interest rate. At 6%, your money doubles in about 12 years. At 8%, about 9 years. At 12%, about 6 years. It's an approximation but remarkably accurate for rates between 4–15%.
Compounding Frequency
Interest can compound annually, semi-annually, quarterly, monthly, or daily. More frequent compounding yields slightly more interest. However, the difference is often small: $10,000 at 7% for 20 years produces $38,697 with annual compounding vs. $40,387 with monthly — a $1,690 difference. The jump from monthly to daily is even smaller. Most savings accounts compound daily; most investment calculations use monthly or annual compounding.
Start Early: The Time Advantage
Time is the most important factor in compound interest. An investor who starts at 25 with $200/month at 7% will have approximately $525,000 by age 65. Someone who starts the same investment at 35 will have only about $243,000 — less than half, despite contributing for only 10 fewer years. Starting early is the single most impactful financial decision you can make.
Frequently Asked Questions
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. It makes your money grow exponentially — often called "interest on interest."
A = P(1 + r/n)^(nt). P is principal, r is annual rate, n is compounding frequency per year, t is years. With contributions, each deposit compounds from the date it's added.
Simple interest only applies to the original principal (I = P × r × t). Compound interest applies to principal plus accumulated interest, creating exponential growth. Over 20+ years, the difference is massive.
More frequent = slightly more interest. But the difference between monthly and daily is tiny. Monthly compounding is the most common for investment calculations. Savings accounts typically compound daily.
Divide 72 by the interest rate to estimate how many years it takes to double your money. At 8%: 72 ÷ 8 = 9 years. It's an approximation that works well for rates between 4–15%.
No. This calculator shows nominal growth before taxes and inflation. Real returns are lower. For a rough "real return" estimate, subtract 2–3% (average inflation) from the interest rate. Consult a financial advisor for tax-specific planning.