Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Simple interest is calculated only on the principal. For example, $1,000 at 10% simple interest earns $100/year every year, while compound interest earns $100 in year one but $110 in year two (because the $100 interest also earns interest), growing faster over time.

The 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 compounding periods per year, and t is time in years. More frequent compounding (monthly vs. annually) produces slightly higher returns.

More frequent compounding yields more growth. $10,000 at 5% annual rate compounded annually for 20 years gives $26,533. Compounded monthly, it becomes $27,126 — over $500 more just from frequency. Daily compounding yields marginally more than monthly compounding at typical interest rates.

The Rule of 72 is a quick mental math shortcut: divide 72 by the annual interest rate to estimate how many years it takes to double your investment. At 6% interest, 72 ÷ 6 = 12 years to double. At 9% interest, it takes 8 years. The rule is approximate but accurate within a percentage point for rates between 6% and 12%.

Regular contributions dramatically accelerate compound growth because each new deposit begins compounding immediately. Adding $200 per month to an initial $5,000 at 7% annual return over 30 years results in approximately $243,000 — far more than the $77,000 contributed, because compounding multiplies both the principal and ongoing contributions over time.