Finance
Compound Interest Calculator
Calculate how your investment grows with compound interest. Enter your principal, interest rate, time period, and compounding frequency to see your final balance, total interest earned, and a year-by-year growth breakdown.
Quick examples
Compound Interest Formula
A = P × (1 + r/n) ^ (n × t)
A= Final amount (what you end up with)
P= Principal (your starting amount)
r= Annual interest rate as a decimal (e.g. 7% = 0.07)
n= Number of times interest compounds per year
t= Time in years
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Frequently Asked Questions
What is compound interest and how does it work?
Compound interest is interest calculated on both your original principal AND the interest you've already earned. Unlike simple interest (which only applies to the principal), compound interest causes your money to grow exponentially. Example: $10,000 at 7% simple interest earns $700/year forever. At 7% compound interest, year one earns $700, year two earns $749, year three earns $802 — because each year's interest is added to the base.
What is the Rule of 72?
The Rule of 72 is a quick mental math trick to estimate how long it takes to double your money. Simply divide 72 by your annual interest rate. At 6% interest: 72 ÷ 6 = 12 years to double. At 9%: 72 ÷ 9 = 8 years. At 12%: 72 ÷ 12 = 6 years. It works because of the mathematical properties of logarithms and is accurate within 1–2% for rates between 2% and 20%.
How often should interest compound for maximum growth?
More frequent compounding produces slightly more growth. Daily compounding is marginally better than monthly, which is better than annual. However, the difference becomes less significant at moderate rates. At 7% over 20 years on $10,000: annual compounding gives $38,697, while daily compounding gives $40,138 — a difference of $1,441. The rate itself matters far more than compounding frequency.
What is the compound interest formula?
The formula is: A = P × (1 + r/n)^(n×t). Where A = final amount, P = principal, r = annual interest rate (as decimal), n = number of times interest compounds per year, t = time in years. For example: $5,000 at 5% compounded monthly for 10 years: A = 5000 × (1 + 0.05/12)^(12×10) = $8,235.05.
What is the difference between compound and simple interest?
Simple interest is calculated only on the original principal: Interest = P × r × t. Compound interest is calculated on the principal plus accumulated interest. Over short periods the difference is small, but over decades it becomes enormous. $10,000 at 7% for 30 years: simple interest gives $31,000 total, while compound interest gives $76,123 — more than double.
What investments use compound interest?
Common compound interest investments include savings accounts and high-yield savings accounts (HYSAs), certificates of deposit (CDs), money market accounts, bonds, and index funds or ETFs (where dividends are reinvested). Stock market returns compound through price appreciation and reinvested dividends. The S&P 500 has historically returned about 10% annually, or ~7% after inflation.