📈 Compound Interest Calculator
See the power of compounding. Calculate how your investment grows over time with regular contributions and different compounding frequencies.
Future Value after 10 years
$20,096.61
Total Contributions
$10,000.00
Interest Earned
$10,096.61
Formula used:
A = P(1 + r/n)^(nt) + PMT × [(1 + r/n)^(nt) − 1] / (r/n)
P = principal · r = annual rate · n = compounding periods/year · t = years · PMT = per-period contribution
📊 View Year-by-Year Breakdown
| Year | Balance | Contributions | Interest |
|---|---|---|---|
| 1 | $10,722.90 | $10,000.00 | $722.90 |
| 2 | $11,498.06 | $10,000.00 | $1,498.06 |
| 3 | $12,329.26 | $10,000.00 | $2,329.26 |
| 4 | $13,220.54 | $10,000.00 | $3,220.54 |
| 5 | $14,176.25 | $10,000.00 | $4,176.25 |
| 6 | $15,201.06 | $10,000.00 | $5,201.06 |
| 7 | $16,299.94 | $10,000.00 | $6,299.94 |
| 8 | $17,478.26 | $10,000.00 | $7,478.26 |
| 9 | $18,741.77 | $10,000.00 | $8,741.77 |
| 10 | $20,096.61 | $10,000.00 | $10,096.61 |
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Send FeedbackWhat is Compound Interest?
Compound interest is the process of earning interest on your interest. Unlike simple interest, which is calculated only on the original principal, compound interest is calculated on the principal plus all previously earned interest. Over time, this creates an exponential growth curve — a phenomenon Albert Einstein allegedly called "the eighth wonder of the world."
The Compound Interest Formula
The standard formula for compound interest is:
A = P(1 + r/n)nt
- A = Final amount
- P = Principal (initial investment)
- r = Annual interest rate (as a decimal, e.g. 7% = 0.07)
- n = Number of times interest compounds per year
- t = Time in years
Example: $10,000 invested at 7% annually, compounded monthly for 10 years: A = 10,000 × (1 + 0.07/12)^(12×10) = $20,097
Compounding Frequency Comparison
Starting with $10,000 at 7% per year for 10 years:
- Annually (n=1): $19,672
- Quarterly (n=4): $20,016
- Monthly (n=12): $20,097
- Daily (n=365): $20,136
The difference between annual and daily compounding is about $464 — showing that while frequency matters, the bigger lever is the interest rate and time horizon.
The Rule of 72
Want a quick mental estimate of how long it takes to double your money? Divide 72 by the annual interest rate:
- At 6%: 72 ÷ 6 = 12 years to double
- At 8%: 72 ÷ 8 = 9 years to double
- At 12%: 72 ÷ 12 = 6 years to double
Why Regular Contributions Matter
Adding regular contributions dramatically accelerates wealth growth. Consider:
- $10,000 one-time at 7% for 30 years = $76,123
- $10,000 + $200/month at 7% for 30 years = $310,267
The monthly contributions add only $72,000 in cash, but generate an extra $162,144 in interest.
Frequently Asked Questions
What's the difference between compound and simple interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus accumulated interest. Over many years, compound interest grows much faster. For example, $1,000 at 10% for 20 years: simple interest = $3,000, compound interest = $6,727.
How do I maximize compound interest?
The three key levers are: start early (time is the most powerful factor), invest consistently (regular contributions amplify growth), and reinvest returns (don't withdraw interest — let it compound).
Is compound interest the same as APY?
APY (Annual Percentage Yield) accounts for compounding, while APR (Annual Percentage Rate) does not. A 7% APR compounded monthly is actually a 7.23% APY. Banks advertise APY on savings accounts and APR on loans — always compare the same metric.