Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which is calculated only on the principal, compound interest causes your money to grow at an accelerating rate. This is why it is often called the 'eighth wonder of the world' — the longer you leave money invested, the more powerful its effect becomes.

The standard compound interest formula is A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of times interest compounds per year, and t is the time in years. For example, $10,000 invested at 5% compounded monthly for 10 years grows to approximately $16,470. You can also compute this instantly using our calculator above.

Compound interest can compound on virtually any schedule — daily, monthly, quarterly, semi-annually, or annually. The more frequently interest compounds, the faster your balance grows. For instance, daily compounding produces slightly more interest than monthly compounding at the same annual rate. Most high-yield savings accounts and money market accounts compound daily or monthly.

Simple interest is calculated only on the original principal, so the interest earned each period stays the same throughout the term. Compound interest, by contrast, is calculated on the principal plus all previously earned interest, causing the balance to grow exponentially over time. On a $10,000 deposit at 5% over 10 years, simple interest yields $5,000 in earnings while compound interest yields roughly $6,470 — a significant difference.

Making regular contributions dramatically accelerates wealth accumulation through compound interest. Each new deposit immediately begins earning compounded returns on top of your existing balance. For example, adding $200 per month to a $5,000 initial investment at 6% annual interest compounded monthly can grow to over $65,000 in 15 years — far exceeding what the lump sum alone would achieve. Our calculator supports optional monthly contributions so you can model this growth.

The Rule of 72 is a quick mental math shortcut to estimate how long it takes for an investment to double at a given compound interest rate. Simply divide 72 by the annual interest rate percentage to get the approximate number of years to double your money. For instance, at 6% interest, your investment doubles in roughly 72 ÷ 6 = 12 years. It works best for rates between 6% and 10%.

Continuous compounding theoretically earns the most interest, followed by daily, monthly, quarterly, semi-annual, and finally annual compounding. In practice, the difference between daily and monthly compounding is very small for typical savings rates. For example, at 5% APR on $10,000 over 5 years, daily compounding yields about $12,840 versus $12,834 with monthly compounding — a difference of just $6. Choosing a higher rate matters far more than compounding frequency.