Compound Interest Calculator
Visualize the exponential growth of your money. Compare Annual vs Daily compounding.
Einstein called it the "Eighth Wonder of the World." Our **Compound Interest Calculator** shows you why. See how small, consistent contributions can grow into a massive fortune through the power of exponential growth.
Growth inputs
How often interest is added to balance.
Future Value
What is Compound Interest Calculator?
The Magic of Compounding
**Compound Interest** is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan.
Think of it like a snowball rolling down a hill. At first, it's small. But as it rolls, it picks up more snow (interest), and the bigger surface area allows it to pick up *even more* snow (interest on interest).
Who Should Use This?
- Savers: To see the difference between a savings account compounded Daily vs Monthly.
- Investors: To project 30-year retirement growth.
- Students: To understand how time is the most important variable in wealth creation.
Why This Tool is Useful
Most people think linearly (1, 2, 3, 4). Compounding works exponentially (2, 4, 8, 16). This tool visualizes that "Hockey Stick" curve so you can set realistic long-term goals.
How to Use This Calculator
Enter your plan:
- Principal ($): Your starting lump sum.
- Monthly Contribution ($): New money you add every month.
- Interest Rate (%): Your expected annual return.
- Compound Frequency: Crucial setting!
- Daily: Best for High-Yield Savings Accounts (HYSA).
- Monthly: Standard for most investment accounts.
- Annually: Conservative estimate for long-term stock market returns.
The "Penny" Question
Would you rather have $1 Million today or a penny that doubles every day for 30 days?
Take the penny! On Day 30, it would be worth over $5.3 Million. That is the power of compounding.
Formula & Calculation
The standard formula for compound interest (Single Lump Sum) is:
Where:
- A = Final Amount
- P = Principal
- r = Annual Interest Rate (decimal)
- n = Number of times compounded per year
- t = Number of Years
Example Calculation
Example 1: The Early Starter (Compound Time)
Scenario: Jack invests $200/mo from age 25 to 35, then stops. (Total Invested: $24k)
Scenario: Jill invests $200/mo from age 35 to 65. (Total Invested: $72k)
Jill's Balance at 65 ≈ $200,000
Result: Jack ends up with $50k MORE despite investing $48k LESS of his own money. Starting early lets compounding do the heavy lifting.
Example 2: Frequency Impact
Scenario: $10,000 at 5% for 10 years.
- Annual Compounding: $16,288
- Monthly Compounding: $16,470 (+$182)
- Daily Compounding: $16,486 (+$198)
Insight: More frequent compounding always yields more money, though the difference is most noticeable with large sums or high rates.
Reference Tables
Rule of 72 Cheat Sheet
Years required to double your money.
| Interest Rate | Years to Double | Years to 4x |
|---|---|---|
| 3% | 24.0 Years | 48.0 Years |
| 6% | 12.0 Years | 24.0 Years |
| 8% | 9.0 Years | 18.0 Years |
| 12% | 6.0 Years | 12.0 Years |
Why use this calculator?
- Motivation: Seeing the numbers proves that small efforts today pay off huge tomorrow.
- Strategy: Helps you decide between a CD (Certificate of Deposit) with Daily vs Monthly compounding.
Frequently Asked Questions
Frequently Asked Questions
Simple vs Compound Interest?
Simple Interest is calculated only on the principal amount. Compound Interest is calculated on the principal PLUS the accumulated interest. Simple grows linearly; Compound grows exponentially.
What is APY vs APR?
APR (Annual Percentage Rate) is the simple interest rate. APY (Annual Percentage Yield) includes the effect of compounding frequency. For savers, APY is the more important number to compare.
Does debt compound?
YES! Credit cards typically compound interest Daily. This is why a $1,000 balance can spiral out of control so quickly if you only make minimum payments.
What is the "Eighth Wonder"?
Albert Einstein is famously quoted: "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it."
Key Terms & Definitions
Disclaimer: Calculations are educational estimates. Actual returns may vary due to tax, timing, and specific bank policies.
Last Updated: January 2026