Compound Interest Calculator

See how your money grows over time with compound interest and regular contributions.

Year-by-Year Breakdown

How Compound Interest Works

The Formula

A = P(1 + r/n)^(nt) — where P = principal, r = annual rate, n = compounding frequency, t = years

The Power of Starting Early

Investing $500/month starting at age 25 yields approximately $1.2M by age 65 at 7%. Waiting until 35 cuts that to roughly $567K — less than half. Time is the most powerful variable in compound interest.

Rule of 72

Quick estimation: divide 72 by the interest rate to find doubling time. At 7%, money doubles in ~10.3 years. At 10%, it doubles in ~7.2 years.

Frequently Asked Questions

• What is compound interest? +

  Compound interest is interest earned on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (calculated only on the principal), compound interest makes your money grow exponentially over time — often called 'interest on interest.'

• How is compound interest calculated? +

  The 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 number of years.

• What's the difference between compound and simple interest? +

  Simple interest is calculated only on the original principal: I = P × r × t. Compound interest is calculated on the principal plus accumulated interest. Over long periods, compound interest produces significantly more growth.

• How often should interest be compounded? +

  More frequent compounding produces slightly higher returns. Monthly compounding is the most common for savings accounts and investments. The difference between daily and monthly compounding is typically minimal, but over decades it can add up.

• What is the Rule of 72? +

  The Rule of 72 is a quick estimation: divide 72 by the annual interest rate to find how many years it takes for an investment to double. For example, at 8% interest, your money doubles in approximately 72/8 = 9 years.

• How much will $10,000 grow in 20 years at 7%? +

  With monthly compounding, $10,000 at 7% annual interest grows to approximately $40,387 in 20 years — quadrupling your money. With $500 monthly contributions added, it grows to approximately $302,000.

• What is effective annual rate (APY)? +

  The effective annual rate (also called APY — Annual Percentage Yield) is the actual annual return after accounting for compounding. A 5% nominal rate compounded monthly has an effective rate of about 5.12%. APY is always equal to or greater than the nominal rate.

• Does compound interest work with regular contributions? +

  Yes, and regular contributions dramatically accelerate growth. Each contribution earns compound interest from the moment it's added. Starting early with small regular contributions often produces better results than investing a large lump sum later.