Compound Interest Calculator
Calculate how your investments grow over time with compound interest — the power of earning interest on your interest.
What Is Compound Interest?
Compound interest is the process of earning interest on both your original investment (the principal) and the accumulated interest from previous periods. It’s one of the most powerful financial concepts because it allows your money to grow faster than with simple interest.
How Compound Interest Works
When interest is compounded, you earn interest not just on your initial deposit but also on the interest that has already been added. The more frequently your interest is compounded — daily, monthly, or quarterly — the faster your money grows.
Compound Interest Formula
The formula for calculating compound interest is:
A = P × (1 + r/n)^(n × t)
- A = Final amount after time period
- P = Principal amount (initial investment)
- r = Annual interest rate (in decimal)
- n = Number of compounding periods per year
- t = Time in years
Example of Compound Interest Calculation
Let’s say you invest $10,000 at an annual interest rate of 5%, compounded monthly, for 10 years. Using the formula, your investment would grow to approximately $16,470. That means you earned $6,470 in interest just by letting your money sit and compound.
Why Compound Interest Is Important
The power of compounding makes a huge difference over time. Even small, consistent investments can turn into large sums if given enough years to grow. This is why starting early and letting time work in your favor is key to financial success.
Compounding Frequencies Explained
- Annually: Interest is added once per year.
- Monthly: Interest compounds 12 times a year — great for savings accounts.
- Daily: Interest is calculated 365 times a year, leading to maximum growth.
Tips for Maximizing Compound Growth
- Start investing early — time is your best friend.
- Reinvest your earnings instead of withdrawing them.
- Increase contributions regularly.
- Use a compound interest calculator or retirement calculator to plan your long-term savings.
External Resources
To learn more about compound interest, check out:
With the Compound Interest Calculator from More Than Calculators, you can easily estimate how your money will grow over time, visualize it with a chart, and experiment with different rates and frequencies.