Calculate how your investment grows over time with the power of compound interest. Enter your principal, interest rate, compounding frequency, and time period to see your final balance.
Compound Interest Calculator
How Compound Interest Works
Compound interest means you earn interest on your interest. Each period, the interest earned is added to your balance, and the next period’s interest is calculated on that larger amount. Over time this creates exponential growth — often called the “eighth wonder of the world.”
The Formula
A = P (1 + r/n)^(nt)
- A = Final amount
- P = Principal (starting amount)
- r = Annual interest rate (decimal)
- n = Compounding periods per year
- t = Time in years
For continuous compounding: A = Pe^(rt)
Example Calculations
| Principal | Rate | Frequency | Years | Final Balance | Interest Earned |
|---|---|---|---|---|---|
| $10,000 | 7% | Monthly | 10 | $20,097 | $10,097 |
| $5,000 | 5% | Annually | 20 | $13,266 | $8,266 |
| $1,000 | 10% | Quarterly | 5 | $1,639 | $639 |
| $50,000 | 4% | Monthly | 30 | $164,917 | $114,917 |
Frequently Asked Questions
What is the difference between compound and simple interest?
Simple interest is calculated only on the original principal each period. Compound interest is calculated on the principal plus all previously earned interest. Over long periods, compound interest grows significantly faster.
How does compounding frequency affect growth?
The more frequently interest compounds, the faster your money grows — though the difference between monthly and daily is small. For example, $10,000 at 7% for 10 years: annually = $19,672; monthly = $20,097; daily = $20,136.
What is the Rule of 72?
Divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 7%, money doubles in about 72 ÷ 7 = 10.3 years. It’s a quick mental math shortcut for compound interest.
What is continuous compounding?
Continuous compounding is the mathematical limit where interest compounds infinitely often. It uses the formula A = Pe^(rt) where e ≈ 2.718. In practice, daily compounding is very close to continuous compounding.
Can compound interest work against me?
Yes. Compound interest on debt (credit cards, loans) works the same way but against you — unpaid balances grow exponentially. That’s why paying off high-interest debt quickly saves significantly more than the face value of the interest rate suggests.