Compound Interest Calculator
Calculate investment growth over time with compounding.
Compound interest is often called the eighth wonder of the world — it is the mechanism by which savings and investments grow exponentially over time. Unlike simple interest, which is calculated only on the principal, compound interest is calculated on the principal plus all previously earned interest. The more frequently interest compounds (daily, monthly, or annually), the faster your balance grows.
How to use this tool
- Enter your initial investment or principal amount.
- Enter the annual interest rate as a percentage.
- Select how often interest compounds (daily, monthly, quarterly, or annually).
- Enter the number of years. The final balance and total interest earned are shown instantly.
Frequently asked questions
What is the compound interest formula?
A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate (decimal), n is the number of compounding periods per year, and t is the time in years.
What is the difference between compound and simple interest?
Simple interest is calculated only on the principal each period. Compound interest is calculated on the growing total (principal + interest earned). Over long periods, compound interest produces dramatically larger returns.
How often should interest compound?
More frequent compounding means faster growth. Daily compounding yields slightly more than monthly, which yields more than annual. The difference becomes significant over many years.
What is the Rule of 72?
The Rule of 72 is a quick mental formula: divide 72 by the annual interest rate to estimate how many years it takes for an investment to double. At 8% interest, 72/8 = 9 years to double.