Compound Interest Calculator
See how your investment grows over time.
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How Compound Interest Works
Compound interest is interest earned on both your original investment and on the interest that has already accumulated. Each time interest is added to your balance, that larger balance earns interest in the next period — creating a snowball effect that accelerates growth over time.
Unlike simple interest, which only ever pays on your starting principal, compound interest reinvests your gains automatically. The longer you leave your money invested, the more dramatic the compounding effect becomes.
The Compound Interest Formula Explained
A = P × (1 + r/n)nt
A = final amount · P = principal · r = annual rate (decimal) · n = compounding periods per year · t = years
For example, $10,000 invested at 6% compounded monthly for 10 years becomes A = 10,000 × (1 + 0.06/12)120 = $18,194. That's $8,194 in interest on top of your original $10,000.
How Compounding Frequency Affects Growth
The more often interest is calculated and added to your balance, the faster your money grows — because each new addition starts earning interest sooner. Daily compounding beats monthly, which beats annual, though the differences are modest at the same stated rate.
On a $10,000 investment at 6% over 10 years: annually gives ~$17,908, monthly ~$18,194, and daily ~$18,221. The gap widens with larger amounts and longer time horizons.
Why Starting Early Matters
Time is the single biggest factor in compound growth. Two people who invest the same total amount can end up with very different balances depending on when they started.
Example: Investing $5,000/year at 7% from age 25 to 35 (just 10 years of contributions, then nothing) grows to about $602,070 by age 65. Waiting until age 35 and investing $5,000/year every year until 65 (30 years of contributions) grows to about $540,741. Starting 10 years earlier — even while contributing far less — wins because the gains had more time to compound.
Common Uses for a Compound Interest Calculator
Retirement Savings
Project how a retirement account or IRA grows over decades so you can check whether you're on track.
Savings Accounts & CDs
Compare different savings products by seeing how their rates and compounding frequencies stack up.
Education Funds
Estimate how a college savings plan can grow before tuition is due.
Reinvestment Planning
See the long-term payoff of reinvesting dividends instead of taking them as cash.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. This causes your balance to grow exponentially over time.
How does compounding frequency affect growth?
More frequent compounding (daily vs annually) results in slightly more growth because interest is calculated and added to the principal more often, giving more opportunities to earn interest on interest.
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 as a decimal, n is the number of times interest compounds per year, and t is the time in years.
Why does starting early matter for compound interest?
The longer your money is invested, the more time compound interest has to work. Even small contributions made early can grow significantly more than larger contributions made later.