Compound Interest Calculator
Compound interest is the engine of long-term wealth building — your returns earn returns. Enter your initial investment, annual rate, and time period to see the final amount and year-by-year growth. Add a monthly contribution to model a savings plan. Choose compounding frequency: the more often interest compounds, the higher your final balance.
Frequently Asked Questions
What is compound interest?
Compound interest means you earn interest not just on your initial principal, but also on the interest you've already earned. Over time, this creates exponential growth — the "snowball effect". Formula: A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounds per year, t is years.
How does compounding frequency affect returns?
The more frequently interest compounds, the more you earn. Monthly compounding yields slightly more than annual, and daily yields a bit more than monthly. The difference becomes significant over long periods. For example, $10,000 at 8% for 20 years: annually → $46,610; monthly → $49,268; daily → $49,530.
What is the Rule of 72?
The Rule of 72 is a quick mental shortcut: divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 8% per year, your money doubles in roughly 9 years (72 ÷ 8). It's an approximation — the calculator gives you the exact figures.
What annual return should I use for investments?
For long-term stock market investments, 7–10% is a historically reasonable estimate (before inflation). For bonds, 3–5%. For a savings deposit, 2–5%. Always use the net-of-fees, net-of-inflation rate for realistic projections.
What's the difference between this and the deposit calculator?
This calculator is designed for investment planning with flexible compounding frequencies and optional monthly contributions. The deposit calculator focuses specifically on bank deposits with capitalization periods.