Compound Interest Calculator
Final Amount
—
Interest Earned
—
What is a Compound Interest Calculator?
A compound interest calculator shows how money grows when interest is earned not just on your original deposit, but also on the interest already accumulated. Over time this compounding effect can dramatically increase a balance compared to simple interest.
How It Works
The compound interest formula:
Example
Invest $5,000 at 7% annual interest, compounded monthly, for 10 years.
- Final balance: $10,048
- Interest earned: $5,048 on a $5,000 investment
Tips
- More frequent compounding means faster growth. Daily compounding beats monthly, which beats annual.
- Time is the most powerful variable. Starting 10 years earlier often matters more than a higher interest rate.
- Enter your rate as a percentage (7), not a decimal (0.07). The calculator converts it automatically.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus all accumulated interest. Over long periods, compound interest grows significantly faster.
What does "compounded monthly" mean?
It means interest is calculated and added to your balance 12 times per year. Each month you earn interest on a slightly larger balance. Common compounding periods are daily, monthly, quarterly, and annually.
What is the Rule of 72?
Divide 72 by your annual interest rate to estimate how long it takes money to double. At 6%, your money doubles in about 12 years. At 9%, about 8 years.
Does compound interest work against you with debt?
Yes. Credit card debt compounds against you the same way investments compound for you. Unpaid interest is added to the principal you owe, so the balance grows even if you make no new purchases.