Compound Interest Calculator
Calculate how your investments grow over time with compound interest
Investment Details
Results
Investment Growth
How to Use This Compound Interest Calculator
Enter Your Initial Investment
Input your starting amount. This could be savings, an inheritance, or any lump sum you plan to invest initially.
Set Monthly Contributions
Enter how much you can add monthly. Consistent contributions dramatically increase your final balance through dollar-cost averaging.
Choose Interest Rate
Set your expected annual return. Historical stock market averages 7-10%, bonds 4-6%, high-yield savings 1-5%. Be realistic for accurate projections.
Select Time Period
Choose your investment duration. Longer periods exponentially increase returns. Compare 10, 20, 30-year scenarios to see the impact of time.
Choose Compounding Frequency
Select how often interest is calculated: Monthly (common for savings), Quarterly, Semi-annually, or Annually. More frequent compounding yields slightly higher returns.
Understanding Compound Interest
Compound interest is often called the "eighth wonder of the world" because it allows money to grow exponentially. Unlike simple interest (which only earns returns on the principal), compound interest earns returns on both your principal and previously accumulated interest.
The Rule of 72
To estimate how long to double your investment, divide 72 by your interest rate. At 8% return, your money doubles in approximately 9 years.
Compound vs Simple Interest
With simple interest on $10,000 at 7% for 30 years, you'd earn $21,000. With compound interest, you'd earn over $87,000 - more than 4x as much!
Time is Your Ally
In compound interest, time matters more than amount. $100/month for 30 years at 8% yields $150,000. Starting early is the single most important factor.
APY vs Interest Rate
The Annual Percentage Yield (APY) reflects compound interest. A 5% interest rate with monthly compounding is actually about 5.12% APY.
Frequently Asked Questions
What is the difference between compound and simple interest?
Simple interest is calculated only on the initial principal. Compound interest is calculated on the principal plus accumulated interest. This difference becomes dramatic over long periods - compound interest grows exponentially while simple interest grows linearly.
Which compounding frequency is best?
The more frequently interest compounds, the more you earn. Monthly compounding is standard for most savings accounts and investments. However, the difference between monthly and annual compounding is usually small (less than 0.1% for typical rates).
Does this calculator account for inflation?
This calculator shows nominal returns. Historical inflation averages 3% annually. To estimate real purchasing power, subtract inflation from your return rate. At 8% return with 3% inflation, your real return is approximately 5%.