Compound Interest Calculator
See how your savings grow over time with compound interest.
What Is Compound Interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest which only grows on the original amount, compound interest creates exponential growth over time. This is why compound interest is often called the most powerful force in finance.
How Do I Calculate Compound Interest?
Enter your initial investment, monthly contribution (if any), annual interest rate, compounding frequency, and investment period. The calculator shows your total balance at the end, how much came from contributions versus interest earned, and a breakdown of growth over time. All calculations run instantly in your browser.
Why Does Compounding Frequency Matter?
More frequent compounding means interest is calculated and added to your balance more often, generating slightly more growth. Daily compounding earns more than monthly, which earns more than annually. However, the differences become smaller as frequency increases. Most savings accounts compound daily while many investments compound monthly or quarterly.
Can I Use This for Retirement Planning?
This calculator provides a simplified projection that is great for understanding how investments grow over long periods. For comprehensive retirement planning, you would also need to account for taxes, inflation, variable returns, and withdrawal strategies. However, this tool is an excellent starting point for seeing the power of long-term compounding.
What Is the Rule of 72?
The Rule of 72 is a quick mental math shortcut: divide 72 by your annual interest rate to estimate how many years it takes for your money to double. At 6% interest, money doubles in approximately 12 years (72/6). At 8%, it doubles in 9 years. At 12%, it doubles in just 6 years. This approximation works well for rates between 2% and 18%.
How Does Inflation Affect Compound Interest Returns?
Inflation erodes the purchasing power of your returns. If your investment earns 7% annually but inflation is 3%, your real (inflation-adjusted) return is approximately 4%. Over 30 years, a $10,000 investment at 7% nominal return grows to $76,123 in nominal terms, but only $42,431 in today's purchasing power. Always consider real returns when planning long-term investments.