Compound Interest Calculator
Use this free online compound interest calculator to see how your money grows over time with different compounding frequencies. Calculate total returns for savings and investments.
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Formula
A = final amount, P = principal, r = annual rate (decimal), n = compounds per year, t = years.
Worked Example
What Is Compound Interest?
- $1,000 at 5% compounded annually grows to $1,628 in 10 years (vs $1,500 with simple interest)
- More frequent compounding (monthly vs annually) produces slightly higher returns
- The Rule of 72: divide 72 by the interest rate to estimate years to double your money
- Starting early makes a dramatic difference: investing $1,000 at age 20 at 7% becomes $21,002 at age 65
Compound interest is the foundation of long-term investing, savings accounts, mortgages, and credit card debt. Understanding it helps you make better financial decisions whether you are saving, investing, or borrowing.
You can also calculate changes using our Simple Interest Calculator or ROI Calculator.
Frequently Asked Questions
What is compound interest?
Interest calculated on both the initial principal and the accumulated interest from previous periods. This means your interest earns interest, creating exponential growth over time.
How does compounding frequency affect returns?
More frequent compounding results in slightly higher returns because interest is calculated and added to the balance sooner, earning interest on itself faster. Daily compounding beats monthly, which beats quarterly, and so on.
What is the Rule of 72?
A quick mental math shortcut: divide 72 by the interest rate to estimate how many years it takes to double your money. At 6%, it takes about 72/6 = 12 years. At 8%, about 72/8 = 9 years.
How does compound interest differ from simple interest?
Simple interest only calculates on the original principal and grows linearly. Compound interest calculates on principal plus accumulated interest and grows exponentially. Over 30 years at 7%, $10,000 becomes $31,000 with simple interest but $76,123 with compound interest.
Why should I start investing early?
Because of compound interest, time is the most powerful factor. $5,000 invested at age 25 at 7% annual return grows to about $74,872 by age 65. The same $5,000 invested at age 35 only grows to $38,061. Starting 10 years earlier nearly doubles the result.
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