Compound Interest Calculator
Calculate compound interest with regular monthly contributions. See how your money grows over time with the power of compounding. See also Simple Interest Calculator and Loan Calculator.
How Compound Interest Works
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (which only earns on the principal), compound interest creates a snowball effect where your money grows exponentially over time. Albert Einstein reportedly called it the "eighth wonder of the world." The more frequently interest compounds, the faster your money grows.
Compound Interest Formula
A = P × (1 + r/n)^(n×t)
Where:
A = Future value
P = Principal (initial investment)
r = Annual interest rate (decimal)
n = Compounding frequency per year
t = Time in years
Example
$10,000 at 7% for 10 years, compounded monthly
A = 10000 × (1 + 0.07/12)^(12×10)
A = 10000 × (1.005833)^120
A = $20,096.61
Interest earned: $10,096.61
The Power of Regular Contributions
Adding regular monthly contributions dramatically accelerates wealth building. For example, $10,000 invested at 7% for 10 years grows to about $20,097. But adding just $200/month turns that into approximately $54,800. The monthly contributions add $24,000 in principal, but compound interest adds an extra $20,800 on top. Starting early and contributing consistently is the most powerful wealth-building strategy available to most people.
Compound Interest Growth Table
| Initial | Monthly | Rate | 10 Years | 20 Years | 30 Years |
|---|---|---|---|---|---|
| $1,000 | $100 | 7% | $18,417 | $53,998 | $122,709 |
| $5,000 | $200 | 7% | $39,835 | $110,996 | $250,418 |
| $10,000 | $500 | 7% | $106,588 | $271,490 | $604,046 |
| $10,000 | $0 | 10% | $25,937 | $67,275 | $174,494 |
| $0 | $500 | 7% | $86,541 | $260,464 | $584,893 |
Frequently Asked Questions
What is the difference between compound and simple interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus all previously accumulated interest. Over time, compound interest grows much faster because you earn "interest on interest."
How often should interest compound?
More frequent compounding produces slightly higher returns. Daily compounding earns more than monthly, which earns more than annually. However, the difference between daily and monthly compounding is small. Most savings accounts compound daily, while most investments compound monthly or quarterly.
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 7%, your money doubles in approximately 72/7 = 10.3 years. At 10%, it doubles in about 7.2 years.