Compound Interest Calculator

Calculate how your investments will grow over time with the power of compound interest.

Quick Examples

About This Calculator

This compound interest calculator helps you understand the power of compound interest and how it can grow your investments or savings over time. Compound interest is essentially "interest on interest" - when the interest you earn on your principal is added back to your principal, and then future interest payments are calculated based on this new, larger principal amount. This creates a snowball effect where your money grows at an accelerating rate over time. With this calculator, you can: • See how an initial investment will grow over time • Calculate the impact of regular additional contributions • Compare different interest rates and compounding frequencies • Visualize your investment growth with interactive charts • Plan for retirement or other long-term financial goals Whether you're saving for retirement, planning for education expenses, or just trying to grow your wealth, understanding compound interest is essential for making informed financial decisions.

Frequently Asked Questions

What is compound interest?

Compound interest is when the interest you earn on an investment or deposit is added to the principal, and then future interest is calculated on this new total (principal + interest). This creates a snowball effect where your money grows at an accelerating rate over time. It's often described as "interest on interest" and is a powerful force in long-term investing.

How does compounding frequency affect my returns?

The more frequently interest compounds, the more your investment will grow over time. For example, an investment that compounds monthly will grow faster than one that compounds annually, even if they have the same annual interest rate. This is because with monthly compounding, you start earning interest on your interest 12 times per year rather than just once.

What's the difference between simple interest and compound interest?

Simple interest is calculated only on the original principal, while compound interest is calculated on both the principal and the accumulated interest. For example, with a $1,000 investment at 5% simple interest, you'd earn $50 each year. With compound interest, you'd earn $50 the first year, but in the second year, you'd earn 5% on $1,050, which is $52.50, and so on, with the interest amount growing each year.

How does inflation affect my investment returns?

Inflation reduces the purchasing power of money over time. For example, if your investment grows by 7% annually, but inflation is 2.5%, your real return (adjusted for inflation) is only about 4.5%. This calculator factors in inflation to show you the future value of your investment in today's dollars, giving you a more realistic picture of your investment's future purchasing power.

What is the Rule of 72?

The Rule of 72 is a simple way to estimate how long it will take for an investment to double. You divide 72 by the annual interest rate to get the approximate number of years. For example, at 8% interest, an investment will double in approximately 72 ÷ 8 = 9 years. This rule provides a quick mental calculation for understanding the power of compound interest.

How do regular contributions affect compound interest?

Regular contributions dramatically accelerate the growth of your investment by increasing the principal on which interest is calculated. Even small regular contributions can have a significant impact over time due to the power of compound interest. For example, $100 contributed monthly to an investment earning 7% annually will grow to over $120,000 after 30 years, even though the total contributions only amount to $36,000.