Compound Interest Calculator
Visualize the "Eighth Wonder of the World." See how consistent investing and time turn small sums into massive wealth.
Growth inputs
How often interest is added to balance.
Future Value
Compound Interest is the concept of earning "interest on interest." It is the engine behind every great fortune. While simple interest grows linearly (1, 2, 3), compound interest grows exponentially (2, 4, 8, 16).
This calculator is designed for Savers and Investors. Whether you are planning [Retirement](/financial/retirement) or just building a rainy-day fund, understanding this curve is critical.
The "Hockey Stick" Curve
In the early years, growth feels slow. This is the "Valley of Disappointment." But once your interest payments start exceeding your contributions, wealth explodes upwards.
Frequency Matters
Banks often advertise rates compounded Daily vs Monthly. While the difference is small on small amounts, it scales significantly for large balances over decades.
Why Time is Your #1 Asset
The most important variable in the compound interest formula isn't the Rate (r) or the Principal (P)—it's Time (t). This is because Time is an exponent in the equation.
Invests $500/mo from age 20 to 30, then STOPS (Total $60k invested).
Result at 60: $1.1 Million
Invests $500/mo from age 30 to 60. (Total $180k invested).
Result at 60: $850,000
Assumes 8% annual return. Notice how investing LESS money earlier yields MORE wealth.
Strategic Wealth Building
The "Rule of 72" Shortcut
Want to do mental math at a dinner party? Use the Rule of 72 to estimate doubling time.
- Stock Market (10%)Doubles ~7.2 Years
- HYSA Savings (5%)Doubles ~14.4 Years
- Checking Acct (0.01%)Doubles ~7,200 Years
Related Financial Tools
Compounding doesn't happen in a vacuum. Use these tools to refine your strategy:
The Math: Compound Interest Formula
Compound interest is calculated using the following exponential formula. It determines the future value of an investment with periodic compounding.
Growth Scenarios: $10,000 Initial Investment
Comparing growth at 8% annual return with different strategies.
| Time Period | Do Nothing (0/mo) | Saver ($200/mo) | Aggressive ($1,000/mo) |
|---|---|---|---|
| 10 Years | $21,589 | $56,354 | $195,413 |
| 20 Years | $46,610 | $165,176 | $639,442 |
| 30 Years | $100,627 | $400,000+ | $1.6 Million |
Related Tools
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the simple interest rate. APY (Annual Percentage Yield) includes the effect of compounding. For example, a 5% APR compounded daily results in a 5.13% APY. Always compare savings accounts using APY.
Does inflation affect potential returns?
Yes. The 'Nominal Rate' is your bank's advertised rate. The 'Real Rate' is that rate minus inflation. If you earn 5% but inflation is 3%, your purchasing power only grows by 2%. Use our [Inflation Calculator](/financial/inflation) to see the real value of your future money.
Is daily compounding significantly better than monthly?
It helps, but not as much as you might think. On $10,000 at 5% over 10 years, daily compounding earns only ~$16 more than monthly. The biggest factor in wealth creation is the **Interest Rate** and **Time**, not the compounding frequency.
How does the 'Rule of 72' works?
The Rule of 72 is a mental shortcut to estimate how long it takes to double your money. Divide 72 by your interest rate. For example, at 8% return, money doubles in 9 years (72 / 8 = 9).
Can debt compound against me?
Absolutely. Credit cards typically use daily compounding on your negative balance. This is why high-interest debt spirals out of control so quickly. It is 'Reverse Compounding' working for the bank, not you.
Glossary of Terms
Principal
The original sum of money put into an investment or loan. In compounding, this is the "seed" that grows properly.
APY (Annual Percentage Yield)
The real rate of return taking into account the effect of compounding interest. APY % > APR %.
Time Horizon
The total length of time an investment is held. The longer the horizon, the more powerful the compounding effect.
Real Return
Your return after inflation and taxes. If you earn 5% and inflation is 5%, your Real Return is 0%.
About This Calculator
This Compound Interest Calculator uses precise double-precision floating-point math to simulate daily, monthly, or annual compounding. It is strictly mathematical and does not forecast stock market volatility or variable interest rates.