Compound Interest Calculator

The compound interest formula is A = P(1 + r/n)^nt, where A is the future value, P is the principal (starting amount), r is the annual interest rate as a decimal, n is the number of times interest compounds per year, and t is the number of years. A $10,000 deposit at 5% compounded monthly for 10 years grows to $16,470.09 using this formula.

Simple interest is calculated only on the original principal for the entire term, while compound interest is recalculated on the growing balance, so you earn interest on your interest. Over a single compounding period the two are identical - $1,000 at 6% for one year grows to $1,060 either way - but they diverge as soon as a second period is added, because compound interest starts earning on that first $60 as well.

Compounding frequency is how many times per year interest is calculated and added to the balance - common values are 1 for annually, 4 for quarterly, 12 for monthly, and 365 for daily. A higher compounding frequency produces a larger future value for the same rate, because interest starts earning its own interest sooner and more often.

It makes a real but modest difference, growing smaller as the frequency increases. $1,000 at 6% for 10 years grows to $1,790.85 compounded annually, $1,819.40 compounded monthly, and $1,822.03 compounded daily - the jump from annual to monthly compounding is worth more than the jump from monthly to daily, because each additional compounding period adds diminishing returns.

Because compound growth is exponential, not linear, so each extra year of growth is worth more than the year before it. $1,000 invested at 7% annually grows to $1,967.15 after 10 years but $14,974.46 after 40 years - the last 10 years alone add more value than the first 30 years combined, which is why the biggest cost of waiting to invest is the growth you cannot get back later.

The Rule of 72 is a quick estimate for how long it takes an investment to double: divide 72 by the annual interest rate. At 6%, 72 / 6 estimates 12 years to double - the actual figure, verified by the compound interest formula, is about 11.9 years, so the rule is a close approximation rather than an exact calculation, most accurate for annual compounding at moderate interest rates.

With a 0% interest rate the future value equals the principal - no growth occurs, since there is no rate for the balance to compound at. This is the calculator's baseline case: any result above the original principal you entered represents money earned purely from compounding.

No. It calculates gross compound growth only, before any taxes on interest income and before adjusting for inflation's effect on purchasing power. A future value shown here is a nominal figure - what your account balance will read - not what that balance will be able to buy, so real-world after-tax, inflation-adjusted returns will be lower than the number this calculator shows.