What is compound interest?
Compound interest is interest earned on both your original deposit and on the interest already added to it. Because each new interest payment becomes part of the balance, growth speeds up over time. This Compound Interest Calculator shows how a starting amount, plus optional monthly deposits, grows at a given rate and compounding frequency. It is useful for savers, investors and students who want to see the effect of time and rate on a balance.
How to use the calculator
- Enter your starting amount.
- Enter the annual interest rate.
- Choose how often interest is compounded: annually, semiannually, quarterly, monthly, daily or continuously.
- Enter the number of years.
- Optionally add a monthly deposit.
- Click Calculate to see the final balance, total deposits, total interest and a year-by-year table.
Below the main tool, the APR ↔ APY converter turns a rate at one compounding frequency into the equivalent rate at another.
Compound interest formula
A = P × (1 + r/n)^(n × t)
where A is the final amount, P is the starting amount, r is the annual rate as a decimal, n is the number of compounding periods per year and t is the number of years. With regular monthly deposits, the calculator adds each deposit at the end of the month and lets it compound from then on.
Example
You invest $1,000 at 6% for 10 years with no further deposits:
- Compounded yearly: $1,000 × (1.06)^10 = $1,790.85, so you earn $790.85 in interest.
- Compounded monthly: $1,000 × (1 + 0.06/12)^120 = $1,819.40, or $819.40 in interest.
The rate converter shows why: 6% compounded monthly is the same as an APY of about 6.168%.
Compounding frequency and growth
The more often interest is compounded, the more often it starts earning interest of its own, so the final amount is slightly higher at the same stated rate. The difference between monthly and daily compounding is small; the bigger drivers of growth are the rate, the amount you add and, above all, time.
Tips
- Start early: in the example above, doubling the time from 10 to 20 years more than doubles the interest earned.
- Compare savings accounts by APY, which already includes compounding.
- Remember that the same math works against you on credit card balances.
- Use the Rule of 72 for a quick check: 72 ÷ 6 = about 12 years to double at 6%.
Compound Interest for Savings and Debt
Compound interest can work in favor of savers and investors by allowing returns to generate additional returns over time. However, it can also increase the total cost of loans and credit balances when interest continues to accumulate. Using a Compound Interest Calculator can help estimate the future value of an investment, determine potential interest earnings, and understand how different rates and compounding periods may affect financial outcomes. The results can be useful when comparing savings strategies or planning long-term financial goals.
Frequently Asked Questions
At 6% compounded yearly it grows to $1,790.85. Compounded monthly it grows to $1,819.40. Adding $100 a month would raise the balance much more, which you can test in the calculator.
Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus previously accumulated interest. As a result, compound interest can produce greater growth over longer periods.
Yes. When interest is compounded more frequently, it is added to the balance more often. This can result in a higher final amount compared with the same annual rate compounded less frequently.
Yes. When interest accumulates on an unpaid balance, the amount owed can increase over time. This is why understanding compounding is important when managing loans and other forms of debt.
The Rule of 72 estimates how many years money takes to double: divide 72 by the annual rate. At 6% that is about 12 years; at 8% about 9 years. It is an approximation that works best for rates between about 4% and 12%.
Disclaimer: This calculator gives estimates for general information only. It is not financial, tax or legal advice. Results depend on the numbers you enter and on simplified assumptions, so your actual figures may differ. Check important decisions with a qualified professional or the official source.
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