Compound Interest Calculator
See how an investment grows over time with compound interest. Enter your principal, annual interest rate, time period, and how often interest compounds.
Final Amount
$1,647.01
Total Contributions
$1,000.00
Interest Earned
$647.01
Educational tool only. This calculator illustrates compound interest growth for learning purposes. Actual investment returns are not guaranteed and depend on many factors. Consult a qualified financial advisor before making investment decisions.
Understanding Compound Interest
Compound interest means you earn interest on your interest — not just on the original principal. Albert Einstein is often (perhaps apocryphally) credited with calling it the "eighth wonder of the world." Whether or not he said it, the math is genuinely powerful over long time horizons.
The Formula
A = P × (1 + r/n)^(n×t) Where: A = Final amount P = Principal (initial investment) r = Annual interest rate (as a decimal, e.g. 0.05 for 5%) n = Number of times interest compounds per year t = Time in years Example: $1,000 at 5% compounded monthly for 10 years: A = 1000 × (1 + 0.05/12)^(12×10) A = 1000 × (1.004167)^120 A ≈ $1,647.01
FAQ
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus accumulated interest. At 10% annually for 3 years on $1,000: simple interest = $300 total interest; compound interest = $331 (interest earned on growing balance). The gap widens dramatically over longer time periods.
Does compounding frequency matter much?
It matters, but less than most people expect. Going from annual to monthly compounding increases returns modestly. Continuous compounding (infinite frequency) represents the mathematical limit. The difference between monthly and daily compounding on $10,000 at 5% for 10 years is about $1. Rate and time are far more impactful than compounding frequency.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double an investment. Divide 72 by the annual interest rate. At 6%, money doubles in about 72 ÷ 6 = 12 years. At 8%, about 9 years. At 4%, about 18 years. It is an approximation but accurate enough for back-of-envelope planning.
Want the full explanation? Read the Compound Interest Guide →