Compound Interest Calculator
Free tool, no sign-up required
Final Amount
$0
Total Interest Earned
$0
Total Contributed
$0
Growth %
0.0%
Balance Growth Over Time
Year-by-Year Growth
| Year | Balance | Interest Earned | Total Contributed |
|---|---|---|---|
| 1 | $0 | $0 | $0 |
| 2 | $0 | $0 | $0 |
| 3 | $0 | $0 | $0 |
| 4 | $0 | $0 | $0 |
| 5 | $0 | $0 | $0 |
Compound interest is what happens when the interest you earn also starts earning interest, instead of only the original amount growing on its own. It is the core idea behind long-term savings accounts, retirement funds, and reinvested business profits, and understanding it is what separates a rough savings estimate from an accurate one.
Formula
A = P(1 + r/n)^(nt)
P is your starting principal, r is the annual interest rate written as a decimal, n is how many times per year interest compounds, and t is the number of years invested. A higher compounding frequency, such as monthly instead of annually, means interest gets added to the balance more often, so each new round of interest is calculated on a slightly larger amount, which compounds into a meaningfully bigger balance over long time horizons even at the same nominal rate.
Example
Example: you invest a $10,000 principal at a 6% annual rate, compounded monthly, for 5 years. A = 10,000 x (1 + 0.06/12)^(12x5), which comes out to roughly $13,489. That is about $3,489 in interest earned on top of the original $10,000, without adding a single extra dollar of your own money.
FAQ
What's the difference between simple and compound interest?
Simple interest is calculated only on the original principal for the entire term, so it grows at a constant, linear rate. Compound interest is recalculated on the principal plus all previously earned interest, so the growth accelerates over time. Over short periods the difference is small, but over many years compound interest produces a noticeably larger balance, which is why it matters most for long-term goals like retirement.
How does compounding frequency affect returns?
The more frequently interest compounds, whether daily, monthly, or annually, the sooner each round of interest starts earning its own interest. At the same nominal annual rate, monthly compounding will always produce a slightly higher balance than annual compounding, because interest is added to the principal twelve times a year instead of once. The effect is small on short timelines but becomes more noticeable the longer money is left to grow, which is why starting early matters more than the compounding frequency itself.
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