Compound Interest Calculator

See how your savings and investments grow over time with compound interest.

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How Compound Interest Works

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (which only earns interest on the principal), compound interest allows your money to grow exponentially over time.

The Compound Interest Formula

A = P(1 + r/n)nt + PMT × [((1 + r/n)nt - 1) / (r/n)]

Where A = future value, P = initial principal, r = annual interest rate, n = compounding frequency per year, t = time in years, and PMT = periodic contribution.

The Power of Starting Early

Due to exponential growth, starting to invest early makes a dramatic difference. For example, investing $500/month at 7% return starting at age 25 yields approximately $1.2 million by age 65. Starting at age 35 with the same amount yields only about $567,000 — less than half — despite contributing for only 10 fewer years.

The Rule of 72

A quick way to estimate how long it takes for your money to double: divide 72 by the annual interest rate. At 7% return, your money doubles in approximately 72/7 = 10.3 years. At 10%, it doubles in about 7.2 years.

FAQ

The S&P 500 has historically returned about 10% annually before inflation, or about 7% after inflation. For a diversified portfolio of stocks and bonds, 6-8% is a common long-term assumption. High-yield savings accounts currently offer 4-5%. CDs offer 3-5%.
More frequent compounding results in slightly more growth. Monthly compounding is most common for savings accounts. The difference between monthly and daily compounding is minimal. Annual vs monthly compounding can make a noticeable difference on large amounts over long periods.
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus all previously earned interest. Over time, compound interest grows much faster. A $10,000 investment at 7% for 30 years grows to $31,000 with simple interest but $76,123 with compound interest.