See how your money grows with compound interest. Free calculator with monthly contributions.
Compound interest is often called the most powerful force in personal finance. Unlike simple interest which only applies to the original principal, compound interest earns returns on both the initial investment and all accumulated interest from previous periods. This means your money grows exponentially rather than linearly over time. This calculator lets you model different compounding scenarios by adjusting the principal, interest rate, compounding frequency, and investment duration. See exactly how much your investment or savings will grow, and understand the dramatic impact that time and compounding frequency have on your final balance.
Enter your initial principal, the annual interest rate as a percentage, select how often interest compounds (daily, monthly, quarterly, or annually), and specify the investment duration in years. The calculator applies the compound interest formula: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual rate as a decimal, n is the number of compounding periods per year, and t is the number of years. The difference between A and P is your total interest earned.
Savings account holders compare interest earnings across different banks and compounding frequencies. Investors project long-term growth of retirement accounts and index fund investments. Students learn the mathematical principles of exponential growth. Financial planners demonstrate to clients why starting to save early makes such a significant difference. Borrowers understand how compound interest works against them on credit card debt.
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Simple interest is calculated only on the original principal amount. Compound interest is calculated on the principal plus all previously accumulated interest. Over time, compound interest produces significantly higher returns. For example, $10,000 at 5% simple interest earns $500 per year forever. With annual compounding, the same investment earns $500 the first year, $525 the second year, $551.25 the third year, and so on.
More frequent compounding produces higher returns, but the difference diminishes as frequency increases. Daily compounding earns slightly more than monthly, which earns slightly more than quarterly, which earns more than annually. The difference between daily and continuous compounding is negligible for typical interest rates.
The Rule of 72 is a quick mental math shortcut to estimate how long it takes for an investment to double. Divide 72 by the annual interest rate. At 6% annual return, your investment doubles in approximately 72 / 6 = 12 years. This approximation works well for rates between 2% and 15%.
This calculator models a single lump-sum investment with no additional deposits. For scenarios involving regular monthly or annual contributions, you would need a compound interest calculator with recurring deposit functionality, which compounds both the initial principal and each subsequent contribution.
Inflation reduces the real purchasing power of your returns. If your investment earns 7% annually but inflation is 3%, your real return is approximately 4%. When planning long-term savings, always consider the real rate of return after inflation to understand how much purchasing power your money will actually gain.