Compound Interest Calculator — See How Your Money Grows Over Time
Calculate compound interest and investment growth
How to use Compound Interest Calculator
Free compound interest calculator. Enter principal, rate, time, and compounding frequency to see final balance and total interest earned. Includes the compound interest formula explained.
A compound interest calculator shows how money grows when interest is earned not just on your original investment, but on previously earned interest too. This snowball effect — earning interest on interest — is the reason a $10,000 investment at 7% grows to $40,387 in 20 years with monthly compounding. Understanding compound interest is fundamental to investing, saving, and understanding the true cost of debt.
How to use this Compound Interest Calculator
- 1Enter your principal — the initial amount you are investing or saving.
- 2Enter the annual interest rate as a percentage (e.g. 7 for 7%).
- 3Set the time period in years.
- 4Choose compounding frequency: daily, monthly, quarterly, or annually. Monthly is the most common for savings accounts and investments.
- 5The calculator shows final balance, total interest earned, and the breakdown between your principal and earned interest.
Compound interest formula explained
The compound interest formula calculates how a principal amount grows over time when interest is reinvested. The key difference from simple interest is the exponent — each period, the entire accumulated balance (not just the original principal) earns interest.
| Variable | Meaning |
|---|---|
| A | Final amount (principal + interest) |
| P | Principal (starting amount) |
| r | Annual interest rate as a decimal (7% = 0.07) |
| n | Compounding frequency per year (monthly = 12) |
| t | Time in years |
Calculate compound interest: $10,000 at 7% for 20 years (monthly compounding)
- 01P = $10,000, r = 0.07, n = 12 (monthly), t = 20
- 02Monthly rate: r/n = 0.07/12 = 0.005833
- 03Total periods: n × t = 12 × 20 = 240
- 04A = 10,000 × (1.005833)^240 = 10,000 × 4.0387
Result
Final balance: $40,387. Total interest earned: $30,387 — three times the original investment, with no additional contributions.
What affects compound interest growth?
Interest rate
The most powerful lever. At 5% for 30 years, $10,000 grows to $43,219. At 8%, the same investment grows to $100,627 — more than double.
Time
The earlier you start, the more dramatic the effect. $10,000 invested at 25 grows to $574,464 by 65 at 10%. Starting at 35 yields only $217,245 — less than half.
Compounding frequency
Daily compounding on $10,000 at 7% for 20 years yields $40,495. Monthly yields $40,387. The difference is smaller than most people expect — time and rate matter far more.
Additional contributions
Regular contributions amplify compounding dramatically. Adding $100/month to a $10,000 investment at 7% for 20 years grows it to $91,473 instead of $40,387.
Tips and things to know
- ✓The Rule of 72: divide 72 by your interest rate to estimate how many years it takes to double your money. At 6%, your money doubles in ~12 years.
- ✓Compound interest works against you on debt too. A $5,000 credit card balance at 20% APR grows to $30,958 in 20 years if unpaid.
- ✓Tax-advantaged accounts (401k, Roth IRA) compound faster in practice because gains are not reduced by annual taxes.
- ✓Always compare accounts using APY (Annual Percentage Yield), not APR — APY already accounts for compounding frequency.
- ✓Inflation reduces real returns. A nominal 7% return with 3% inflation gives a real return of approximately 4%.
Official resources and further reading
SEC Investor.gov — Compound Interest Calculator
The SEC's official compound interest calculator with guidance on how compounding frequency affects investment growth over time.
FDIC — How Interest Works on Savings Accounts
FDIC Money Smart program explaining how banks calculate and apply compound interest on savings accounts and CDs.
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Frequently asked questions
Compound interest earns interest on both your original principal and previously earned interest. This creates exponential growth over time.