Compound Interest Calculator
Find out how your money grows when interest compounds on both principal and accumulated earnings. Choose your compounding frequency for accurate projections.
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Compound interest is what happens when your interest earns interest. You put $1,000 in an account at 5%. After year one, you have $1,050. In year two, you don't just earn 5% on the original $1,000 – you earn 5% on the full $1,050. That extra $50 starts working for you.
Over short periods, the difference between simple and compound interest is negligible. Over decades, it's everything. $10,000 at 7% for 30 years becomes $31,000 with simple interest. With compound interest? $76,123. That's not a typo. The extra $45,000 comes from interest stacking on interest, year after year.
Time is the secret ingredient. A 25-year-old who invests $5,000/year for just 10 years ($50,000 total) and then stops will have more at 65 than someone who starts at 35 and invests $5,000/year for 30 years ($150,000 total). The early starter's money had 10 extra years to compound. That's the power you're harnessing.
| Frequency | Times Per Year | $10,000 at 5% for 10 Years | Difference |
|---|---|---|---|
| Annually | 1 | $16,289 | Baseline |
| Semi-annually | 2 | $16,386 | +$97 |
| Quarterly | 4 | $16,436 | +$147 |
| Monthly | 12 | $16,470 | +$181 |
| Daily | 365 | $16,487 | +$198 |
The difference seems small here, but scales with larger amounts and longer time horizons. Over 30 years, daily vs annual compounding on $100,000 at 6% means an extra $1,800.
Want to know how long it takes to double your money at a given interest rate? Divide 72 by the rate. At 6%, your money doubles in 12 years (72 ÷ 6 = 12). At 8%, it doubles in 9 years. At 10%, just over 7 years.
The Rule of 72 isn't exact, but it's close enough for quick estimates. It works because of how compound interest math works out. The actual formula is ln(2) / ln(1 + r), which is harder to calculate in your head.
Doubling Time Examples
At 3%
24 years
At 5%
14.4 years
At 7%
10.3 years
At 10%
7.2 years
How is compound interest calculated?
The formula is A = P(1 + r/n)^(nt), where P is principal, r is annual rate (as decimal), n is compounding frequency per year, and t is years. For $10,000 at 5% compounded monthly for 10 years: A = 10000(1 + 0.05/12)^(12×10) = $16,470.
Does compound interest work against you?
Absolutely. Credit cards compound daily, typically at 20-30% APR. That $5,000 balance at 24% compounded daily becomes $6,300 in just one year if you don't pay it down. Compound interest builds wealth when you're earning it, destroys wealth when you're paying it.
What's the difference between APY and APR?
APR is the simple annual rate. APY (Annual Percentage Yield) includes compounding. A 5% APR with monthly compounding equals 5.12% APY. Banks advertise APY for savings accounts (looks higher) and APR for loans (looks lower). Always compare APY to APY.
Is compound interest better than simple interest?
For investors, yes – compound interest earns more over time. For borrowers, simple interest is cheaper. Most savings accounts and investments use compound interest. Most personal loans use simple interest. Mortgages and credit cards use compound interest.
How can I maximize compound interest?
Three levers: start early (time is the biggest factor), contribute consistently (more principal = more compounding), and seek higher rates (within your risk tolerance). A 25-year-old investing $300/month at 7% retires with $525,000. Waiting until 35 cuts that to $245,000.
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