Calculate how your money grows with compound interest over time. Understand the power of compounding and plan your investments, savings, and retirement with confidence.
Compound interest is often called the "eighth wonder of the world" because of its remarkable power to grow wealth over time. Unlike simple interest, which only earns returns on your principal, compound interest earns returns on both your principal and previously earned interest. This creates exponential growth that can dramatically increase your wealth over long periods.
The key difference: With simple interest, you earn the same amount each period. With compound interest, your earnings increase each period because you're earning interest on a growing balance. This compounding effect becomes more powerful over time, which is why starting to invest early is so important.
The formula for compound interest is:
A = P(1 + r/n)^(nt)
Where:
This formula shows how the frequency of compounding (n) affects your returns. More frequent compounding leads to higher returns, though the difference becomes smaller as frequency increases.
Interest can compound at different frequencies, each affecting your final return:
Generally, more frequent compounding results in higher returns, though the difference between monthly and daily compounding is usually small. The difference between annual and monthly compounding can be significant over long periods.
The calculator will automatically display your final amount, total interest earned, and show how your investment grows over time. You can adjust any input to see how different scenarios affect your returns.
This is your total investment value at the end of the time period, including both your original principal and all interest earned. This is the amount you'll have after the specified time period.
This shows how much interest you earned over the investment period. It's the difference between your final amount and your initial principal. This number demonstrates the power of compound interest - over time, you may earn more in interest than your original investment.
Many calculators show how your investment grows over time. This visualization helps you understand how compound interest accelerates - growth is slow at first but becomes much faster as your balance increases and more interest compounds.
Person A invests $5,000 at age 25 at 7% annual interest, compounded monthly, and never adds more money. By age 65, they have approximately $80,000.
Person B waits until age 35 to invest the same $5,000 at the same rate. By age 65, they have approximately $40,000 - half of Person A's amount, despite investing the same principal.
This demonstrates why starting early is so powerful - those extra 10 years of compounding make a huge difference.
Investing $200 per month at 6% annual interest, compounded monthly, for 30 years results in approximately $200,000. The total invested is only $72,000, but compound interest grows it to nearly three times that amount.
A $10,000 investment at 5% for 20 years grows to approximately $27,000. At 8% for the same period, it grows to approximately $49,000. A 3% difference in interest rate more than doubles your final amount over 20 years.
Calculate how your money grows with compound interest over time.
Monthly = 12, Quarterly = 4, Annually = 1
