📈 Compound Interest Calculator

See how your money grows over time with the power of compound interest and regular contributions.

Investment Details

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Future Value
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Starting Amount
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Total Contributions
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Total Interest Earned
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Effective Annual Rate
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What is Compound Interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which is only calculated on principal, compound interest causes wealth to grow exponentially over time — this is why Albert Einstein reportedly called it "the eighth wonder of the world."

The Formula

A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) / (r/n)]

Where: P = principal, r = annual rate, n = compounding periods/year, t = years, PMT = periodic payment

How Compounding Frequency Affects Growth

The more frequently interest compounds, the more you earn. Here's the difference on $10,000 at 8% for 10 years:

  • Annually: $21,589
  • Quarterly: $21,911
  • Monthly: $22,196
  • Daily: $22,254

The Power of Starting Early

Time is the most powerful variable in compound interest. Investing $500/month starting at age 25 vs. age 35 (both at 8% annual return) produces dramatically different outcomes by retirement:

  • Starting at 25: ~$1.75 million by age 65
  • Starting at 35: ~$745,000 by age 65

That 10-year head start more than doubles the final result — despite only contributing an extra $60,000 in actual dollars.

What is the Rule of 72? +
The Rule of 72 is a quick way to estimate how long it takes to double your money: divide 72 by the annual interest rate. At 8%, money doubles in approximately 72/8 = 9 years. At 6%, it takes about 12 years.
What's the difference between APY and APR? +
APR (Annual Percentage Rate) is the simple interest rate. APY (Annual Percentage Yield) accounts for compounding within the year. If a bank compounds monthly at 8% APR, the APY is approximately 8.3%. APY is what you actually earn.
How do taxes affect compound interest? +
In taxable accounts, interest, dividends, and capital gains are taxed each year, reducing the compounding effect. Tax-advantaged accounts like 401(k)s and IRAs allow investments to compound tax-deferred (or tax-free for Roth), significantly boosting long-term growth.