Compound Interest Calculator
Calculate how your money grows with compound interest over time.
| Year | Balance | Contributions | Interest |
|---|---|---|---|
| 1 | $11,962.16 | $11,200.00 | $762.16 |
| 2 | $14,066.16 | $12,400.00 | $1,666.16 |
| 3 | $16,322.27 | $13,600.00 | $2,722.27 |
| 4 | $18,741.46 | $14,800.00 | $3,941.46 |
| 5 | $21,335.54 | $16,000.00 | $5,335.54 |
| 6 | $24,117.15 | $17,200.00 | $6,917.15 |
| 7 | $27,099.84 | $18,400.00 | $8,699.84 |
| 8 | $30,298.15 | $19,600.00 | $10,698.15 |
| 9 | $33,727.66 | $20,800.00 | $12,927.66 |
| 10 | $37,405.09 | $22,000.00 | $15,405.09 |
What is compound interest?
Compound interest is interest calculated on both the initial principal and all previously accumulated interest. Unlike simple interest (which applies only to the original amount), compound interest creates an exponential growth effect — your money earns interest on its interest. Albert Einstein reportedly called compound interest the eighth wonder of the world.
The formula is: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the number of years. More frequent compounding (monthly vs. annually) produces slightly more growth because interest starts earning interest sooner.
The Rule of 72
The Rule of 72 is a quick mental shortcut: divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 6% annual return, your money doubles in approximately 12 years (72 divided by 6). At 8%, it doubles in about 9 years. At 12%, roughly 6 years. This approximation is surprisingly accurate for rates between 4% and 15%.
How to use this tool
Enter the initial principal, annual interest rate, compounding frequency (daily, monthly, quarterly, or annually), and investment period. Optionally add regular monthly contributions. The calculator shows the final balance, total interest earned, and a chart showing how the balance grows over time.
The power of starting early
Time is the most powerful variable in compound interest. If you invest $200 per month starting at age 25 with a 7% annual return, you will have approximately $525,000 by age 65. If you wait until age 35 to start, you will have only about $244,000 — less than half — despite investing for only 10 fewer years. Starting 10 years earlier more than doubles the result because early contributions have decades to compound.
Investment tips
Consistency beats timing. Investing a fixed amount regularly (dollar-cost averaging) reduces the impact of market volatility and builds discipline. Reinvesting dividends accelerates compounding. Minimize fees and taxes — even a 1% annual fee can reduce your final balance by 20–30% over a 30-year period. Use tax-advantaged accounts (401k, IRA, ISA) whenever possible.
Worked example
Invest $10,000 at 7% compounded annually for 30 years: 10,000 × (1.07)^30 ≈ $76,120 — more than seven times the original, with $66,120 of that being pure growth. The same $10,000 at simple interest would reach only 10,000 + (10,000 × 0.07 × 30) = $31,000. Adding $200 every month over the same period pushes the compounded total past $300,000.
Common mistakes
The biggest mistake is underestimating time: compounding rewards early, uninterrupted investing, so starting ten years later can roughly halve your final balance. People also ignore compounding frequency — monthly compounding beats annual for the same nominal rate. Finally, inflation and fees quietly erode returns; a 7% return with 2% fees and 3% inflation leaves a real gain nearer 2%, so compare net, inflation-adjusted figures.
Frequently asked questions
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the stated annual rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding. For example, a 12% APR compounded monthly has an APY of 12.68%. When comparing savings accounts, compare APY. When comparing loans, compare APR.
How does inflation affect compound interest?
Inflation erodes the purchasing power of your returns. If your investment earns 7% but inflation is 3%, your real (inflation-adjusted) return is approximately 4%. Always consider real returns when planning long-term investments. The calculator shows nominal returns — subtract your local inflation rate for a more realistic picture.
What is the Rule of 72?
The Rule of 72 estimates how long an investment takes to double: divide 72 by the annual interest rate. At 8%, money doubles in about 72 ÷ 8 = 9 years. It is a quick mental shortcut that is accurate for rates between roughly 6% and 10%.