Compound Interest Calculator
See how your money grows over time with the power of compound interest. Enter your details below.
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What Is Compound Interest?
Compound interest is the interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which only earns interest on the original amount, compound interest allows your money to grow exponentially over time.
Albert Einstein reportedly called compound interest "the eighth wonder of the world." Whether or not he actually said it, the concept is powerful: the longer your money compounds, the faster it grows.
The Compound Interest Formula
The basic formula for compound interest is:
A = P(1 + r/n)^(nt)
- A — Final amount
- P — Initial principal (starting investment)
- r — Annual interest rate (as a decimal)
- n — Number of times interest compounds per year
- t — Number of years
When regular contributions are added, the formula becomes:
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]
Compound vs. Simple Interest
Simple interest is calculated only on the original principal: A = P(1 + rt). With $10,000 at 7% for 10 years, simple interest yields $17,000. Compound interest (monthly) yields $20,096.61 — that's $3,096.61 more, purely from compounding.
How Compounding Frequency Affects Growth
The more frequently interest compounds, the more you earn. Daily compounding earns slightly more than monthly, which earns more than quarterly. However, the difference between daily and monthly compounding is usually small — the biggest jump comes from going from annual to monthly.
Examples
- Retirement savings: $500/month at 8% for 30 years grows to over $745,000
- College fund: $200/month at 6% for 18 years becomes approximately $77,000
- Emergency fund: $10,000 at 4.5% for 5 years grows to about $12,500