Compound Interest Calculator
Calculate compound interest growth
Frequently Asked Questions
What is compound interest and how does it work?
Compound interest is interest earned on both the initial principal and previously accumulated interest. The formula is A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding frequency, and t is time in years.
How does compounding frequency affect returns?
More frequent compounding yields slightly higher returns. $10,000 at 5% for 10 years: annually = $16,288.95, monthly = $16,470.09, daily = $16,486.65. The difference between monthly and daily compounding is minimal for most practical purposes.
What is the Rule of 72 for compound interest?
The Rule of 72 estimates how long it takes to double your money: Years to double ≈ 72 / interest rate. At 6% interest, your money doubles in approximately 12 years. At 8%, it doubles in about 9 years.
How do regular contributions affect compound growth?
Adding regular contributions dramatically accelerates growth. $10,000 initial with $200/month at 7% for 20 years grows to approximately $123,000 — compared to just $38,700 without monthly contributions.
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal: I = P × r × t. Compound interest includes interest on interest. Over 20 years at 5%, $10,000 earns $10,000 in simple interest but $16,533 in compound interest — a 65% difference.