Compound Interest Calculator
See how your money grows over time with the power of compounding.
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Total Interest Earned
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Growth Over Time
Year-by-Year Breakdown
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How Compound Interest Works
Compound interest is often called the "eighth wonder of the world" — and for good reason. Unlike simple interest which only earns on your original principal, compound interest earns interest on your interest. This creates exponential growth over time.
The formula is: A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)] where P is principal, r is annual rate, n is compounding frequency, t is years, and PMT is periodic contributions.
The key takeaway: the earlier you start, the more time compounding has to work in your favor. Even small monthly contributions can grow into substantial wealth over decades.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both your original principal and the interest you have already earned. Unlike simple interest, which accrues only on the principal, compounding lets your returns generate their own returns — producing exponential growth the longer your money stays invested.
How is compound interest different from simple interest?
Simple interest pays a fixed amount each period based only on the principal. Compound interest adds each period's interest back to the balance, so the next period earns interest on a larger amount. Over long horizons, that difference becomes dramatic.
How often should interest compound?
More frequent compounding — daily or monthly rather than annually — produces slightly higher returns because interest is added to the balance sooner. The effect is real but modest compared with the rate of return and, above all, the length of time invested.
How much difference does starting early make?
A large one. Because compounding is exponential, the earliest years matter most. Someone who starts investing in their 20s can finish with more than someone who starts in their 30s and contributes more, simply because their money compounds for longer.