Compound Interest Calculator — See Your Money Grow
A = P(1 + r/n)^(nt) — compare compounding frequencies and see how interest earns interest.
- Contributions
- Balance
Final Balance
$13,601.56
Your money grew 1.36x
- Total
- Total Balance
- Principal + Contributions
The gap between the solid and dashed lines represents interest earned: $3,601.56
| Year | Starting Balance | Contribution | Interest Earned | Ending Balance |
|---|---|---|---|---|
| Year 1 | $10,000.00 | $0.00 | $634.52 | $10,634.52 |
| Year 2 | $10,634.52 | $0.00 | $674.78 | $11,309.29 |
| Year 3 | $11,309.29 | $0.00 | $717.59 | $12,026.89 |
| Year 4 | $12,026.89 | $0.00 | $763.13 | $12,790.01 |
| Year 5 | $12,790.01 | $0.00 | $811.55 | $13,601.56 |
| Totals | — | $0.00 | $3,601.56 | — |
Simple vs. compound interest
With simple interest you earn a flat percentage of the principal each period. With compound interest you earn interest on the principal and on accumulated interest, so balances grow faster over time. $100 at 10% simple for two years earns $20; compounding annually earns $21 — and the gap widens dramatically over decades.
The basic formula
A = P × (1 + r/n)n×t
Where P is principal, r the annual rate, n the compounding periods per year, and t the years. For continuous compounding the limit is A = P × er×t.
Different compounding frequencies
The more often interest compounds, the more you earn — but with diminishing returns. A 6% rate compounded monthly is effectively 6.17% annually. Savings accounts and CDs often compound annually; mortgages and credit cards usually compound monthly. Lenders sometimes quote the lower-looking monthly-compounded rate to make borrowing appear cheaper.
The Rule of 72
For a quick doubling-time estimate, divide 72 by the annual rate: at 8% your money doubles in about 9 years. It's a rough tool, best for rates between 6% and 10%.
A double-edged sword
Compounding builds wealth for savers, but it works against borrowers — prolonging debt dramatically increases total interest owed. Time horizon is the single biggest factor in how much compounding helps (or hurts) you.
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