Compound Interest Calculator — See How Investments Grow Over Time
Compound interest is the mechanism by which money grows exponentially rather than linearly over time. Unlike simple interest, which is calculated only on your original principal, compound interest adds earned interest back to your principal at each compounding period — so you earn interest on your interest. Over long periods, this compounding effect produces dramatically larger returns than the numbers initially suggest.
Albert Einstein is often credited (probably apocryphally) with calling compound interest the eighth wonder of the world. Whether or not he said it, the mathematics back up the sentiment. A $10,000 investment at 7% annual return compounded monthly for 30 years grows to approximately $81,400 — over eight times the original investment, with $71,400 of that being pure compound growth rather than contributions.
The formula is: A = P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate as a decimal, n is the number of compounding periods per year, and t is time in years.
Compounding frequency matters. Daily compounding yields slightly more than monthly, which yields slightly more than annually — but the differences are smaller than most people expect compared to the impact of the interest rate and time horizon. The dominant variables are rate and time. Starting early matters far more than picking the highest compounding frequency.
This calculator is useful for: comparing savings account options, estimating the long-term growth of index fund investments, understanding how a lump-sum investment compounds over time, and illustrating the cost of debt (compound interest works in reverse when you are the borrower).
How to use the Compound Interest Calculator
- Enter your initial investment amount.
- Enter the annual interest rate as a percentage.
- Enter the time period in years.
- Select how often interest is compounded.
- Read the final amount, total interest earned, and the growth breakdown.