Calculate compound interest on investments and savings. See how your money grows over time with different compounding frequencies.
Enter the initial investment amount
Enter the annual interest rate as a percentage
Enter the investment period in years
Compound interest is often called the "eighth wonder of the world" for its remarkable ability to grow wealth over time. Understanding how compound interest works, how to calculate it, and how to leverage it for your financial goals is one of the most important financial concepts you can master. Our comprehensive guide to compound interest will help you understand this powerful force, calculate your investment growth, and make smarter financial decisions that can transform your financial future.
Compound interest is interest calculated on the initial principal amount plus all accumulated interest from previous periods. Unlike simple interest, which only earns on the principal, compound interest allows your money to grow exponentially because you earn interest on your interest. This compounding effect becomes more powerful over time, making it a cornerstone of long-term wealth building and investment strategy.
The formula for compound interest is:
A = P(1 + r/n)^(nt)
Where:
This formula reveals the exponential nature of compound interest. The key insight is that as time increases, the growth accelerates because each compounding period builds on the previous period's total, not just the original principal.
Compounding frequency significantly impacts your returns. The more frequently interest compounds, the more you earn. Common compounding frequencies include annual, semi-annual, quarterly, monthly, and daily compounding. Monthly compounding (12 times per year) is standard for most savings accounts and investment vehicles, while daily compounding (365 times per year) provides maximum benefit and is used by many high-yield savings accounts.
Time is the most powerful factor in compound interest. The longer your money compounds, the more dramatic the growth. Consider this: if you invest $10,000 at 7% annual interest, after 10 years you'll have approximately $19,672. But after 30 years, you'll have $76,123—nearly four times as much, even though you only tripled the time period. This exponential growth is why financial advisors emphasize starting to invest as early as possible.
Compound interest is the foundation of retirement planning through 401(k) plans and IRAs. It powers education savings through 529 plans, drives investment growth through dividend reinvestment, and unfortunately, works against you with credit card debt and other high-interest loans. Understanding compound interest helps you leverage it for wealth building while avoiding its negative effects with debt.
Our compound interest calculator makes it easy to see how your investments will grow over time. Enter your principal amount, interest rate, time period, and compounding frequency to see your final amount and total interest earned. Compare different scenarios to understand how small changes in rate or time can dramatically impact your returns.
Start investing early to give compound interest maximum time to work. Invest consistently through dollar-cost averaging, reinvest all earnings to compound on your entire balance, choose investments with higher compounding frequencies when possible, and avoid withdrawals that reduce your principal and interrupt the compounding effect.
Avoid underestimating the power of time, waiting too long to start investing, withdrawing earnings early, ignoring compounding frequency, and not reinvesting dividends or interest. Each of these mistakes can cost you thousands or even tens of thousands of dollars over time.
The Rule of 72 is a quick mental calculation to estimate how long it takes for an investment to double at a given interest rate. Divide 72 by your interest rate to get the approximate number of years. For example, at 7% interest, your money doubles in approximately 10.3 years (72 ÷ 7 = 10.3). This rule helps you quickly understand the power of different interest rates.
Compound interest is one of the most powerful financial concepts you can understand and leverage. Whether you're saving for retirement, building an emergency fund, or investing for long-term goals, compound interest can be your greatest ally. Our compound interest calculator helps you visualize this power and plan your financial future. Remember that time is your greatest asset when it comes to compound interest—start early, invest consistently, and let time and compounding work their magic. With patience and discipline, compound interest can help you achieve financial goals that might seem impossible today.
Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods. It allows your investment to grow exponentially over time.
Interest can compound annually, semi-annually, quarterly, monthly, or daily. More frequent compounding results in higher returns, though the difference becomes smaller as frequency increases.
The formula is A = P(1 + r/n)^(nt), where A is the final amount, P is principal, r is annual interest rate, n is compounding frequency, and t is time in years.