Compound Interest Calculator
Calculate the power of compound interest and see how your investments can grow exponentially over time with regular contributions and different compounding frequencies.
Input Values
Results
Enter values and calculate
How to Use
- 1Enter your initial principal investment amount
- 2Input the annual interest rate (APR)
- 3Select the time period for your investment (1-50 years)
- 4Choose how often interest compounds (annually to daily)
- 5Add optional monthly contributions to boost growth
- 6Select contribution timing (beginning or end of period)
- 7Click Calculate to see your investment grow exponentially
Formula
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)] Where: A = Final Amount P = Initial Principal r = Annual Interest Rate (decimal) n = Compound Frequency per year t = Time in years PMT = Regular Contribution
Common Use Cases
Understanding Compound Interest
Compound interest is often called the "eighth wonder of the world" because of its incredible power to grow wealth over time. Unlike simple interest, which is calculated only on the principal amount, compound interest is calculated on the principal plus the accumulated interest.
This means your money earns money, and then that new money earns even more money. Over long periods, this exponential growth can turn modest savings into a substantial fortune.
The Formula for Success
The standard formula for compound interest is:
- A: The future value of the investment/loan, including interest.
- P: The principal investment amount (the initial deposit).
- r: The annual interest rate (decimal).
- n: The number of times that interest is compounded per unit t.
- t: The time the money is invested or borrowed for, in years.
Key Factors That Affect Growth
Time
Time is your best friend. The longer your money stays invested, the more it compounds. Starting 10 years earlier can often double or triple your final result, even with smaller contributions.
Frequency
How often interest is added matters. Daily compounding grows faster than annual compounding because interest is added to the pile more frequently, starting the cycle sooner.
Rate of Return
Higher interest rates lead to significantly higher returns. While you can't control the market, minimizing fees and choosing the right investment vehicles can improve your effective rate.
Regular Contributions
Adding money regularly (e.g., monthly) supercharges the process. It increases your principal base constantly, giving the interest rate more capital to work on.
The Rule of 72
Want a quick way to estimate how long it will take to double your money? Use the Rule of 72.
Simply divide 72 by your annual interest rate.
- At 6% return:72 / 6 = 12 years to double
- At 8% return:72 / 8 = 9 years to double
- At 10% return:72 / 10 = 7.2 years to double
Frequently Asked Questions
What is the difference between simple and compound interest?▼
Simple interest is calculated only on the initial principal. Compound interest is calculated on the principal plus any accumulated interest. Compound interest grows much faster over time.
How does inflation affect my returns?▼
Inflation reduces the purchasing power of your money over time. To find your "real" return, subtract the inflation rate from your investment return. For example, a 7% return with 3% inflation is a 4% real return.