Compound Interest Calculator
See how your money grows with the power of compounding
Last updated: January 2025
About This Tool
Compound interest is one of the most powerful concepts in finance. Often called the "eighth wonder of the world," it allows your money to grow exponentially over time by earning interest on both your principal and previously accumulated interest.
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 only earns interest on the original amount, compound interest allows your money to grow at an accelerating rate. The more frequently interest compounds (daily, monthly, annually), the more your investment grows.
How It Works
When you invest money that earns compound interest, your earnings are added to your principal at regular intervals. In the next period, you earn interest on this larger amount. This cycle continues, creating exponential growth over time. The key factors are the principal amount, interest rate, compounding frequency, and time.
Formula
A = P(1 + r/n)^(nt)
Future Value
$113,669.42
After 10 years with monthly compounding
Growth Over Time
Investment Summary
Growth Stats
💡 Power of Compounding
- • Start early - time is your biggest asset
- • More frequent compounding = higher returns
- • Even small monthly contributions add up
Related Tools
When to Use This Calculator
- 1Planning long-term investments like retirement savings
- 2Understanding how your savings account grows over time
- 3Comparing investment options with different compounding frequencies
- 4Setting realistic financial goals based on projected growth
- 5Teaching children about the value of early investing
Pro Tips
- •Start investing as early as possible - time is your greatest ally
- •The Rule of 72: Divide 72 by your interest rate to estimate doubling time
- •More frequent compounding (daily vs. annually) yields slightly higher returns
- •Reinvest dividends and interest to maximize compounding benefits
- •Small differences in interest rates compound to large differences over decades
Common Mistakes to Avoid
- •Waiting too long to start investing and losing valuable compounding time
- •Withdrawing interest instead of letting it compound
- •Underestimating the impact of fees on long-term returns
- •Not accounting for inflation when projecting future values
- •Comparing simple interest rates with compound interest rates