Compound Interest Calculator
See the power of compound interest. Calculate how your savings or investments will grow over time with regular contributions and compound earnings.
What is Compound Interest?
Compound interest is interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. Often called \"interest on interest,\" compound interest grows your money exponentially over time.
The Rule of 72
Want to quickly estimate how long it takes to double your money? Divide 72 by your annual interest rate. At 7% return, your money doubles in approximately 10.3 years (72 / 7 = 10.3).
Why Start Early?
Starting to invest at age 25 vs. 35 can mean a difference of hundreds of thousands of dollars by retirement. Time is your greatest asset when it comes to compound interest.
Frequently Asked Questions
What is compound interest and why does it matter?
Compound interest is interest earned on both your initial principal and accumulated interest. Albert Einstein reportedly called it the 'eighth wonder of the world.' Over time, compound interest creates exponential growth, making it your most powerful wealth-building tool.
How often should I compound my savings?
More frequent compounding (daily or monthly) generates slightly more returns than annual compounding. With modern savings accounts and investments, compounding typically occurs monthly. The difference is small but adds up over decades.
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal amount. Compound interest includes accumulated interest in each calculation. For a $10,000 investment at 5% over 20 years: simple interest = $10,000, compound interest = $26,533.
How much can I earn with compound interest over 10 years?
Example: $10,000 invested at 7% annual return with $200/month contributions = approximately $53,000 after 10 years (vs $24,000 with no growth). Use our calculator to model your specific scenario.
What is a realistic expected investment return?
Historical average annual returns: S&P 500 index funds ~10%, bonds ~5%, high-yield savings ~4-5%. Remember that past performance doesn't guarantee future results. Factor in inflation (historically ~3%).
How do regular contributions affect compound growth?
Regular contributions dramatically increase compound growth. Example: $10,000 initial + $500/month at 8% for 20 years = ~$298,000. Without contributions, the same initial amount grows to only ~$46,600.