Compound Interest Calculator
Calculate investment growth over time with compound interest, regular monthly additions, and detailed yearly amortization schedules.
Projected total balance after 10 years.
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What Is a Compound Interest Calculator?
A compound interest calculator calculates the exponential growth of money when interest earned in each period is reinvested to generate additional interest in subsequent periods. Albert Einstein famously described compound interest as the eighth wonder of the world.
How to Use This Calculator
- Enter your starting initial investment (Principal).
- Specify expected Annual Interest Rate (e.g. 7% for index funds).
- Set investment duration in years.
- Optionally add regular Monthly Contributions.
- Select compounding frequency (Daily, Monthly, Quarterly, or Annually).
- Examine your total balance, principal vs. interest breakdown, and annual growth schedule.
Compound Interest Formula
A = P\left(1 + \frac{r}{n}\right)^{nt} + PMT \times \left[ \frac{\left(1 + \frac{r}{n}\right)^{nt} - 1}{\frac{r}{n}} \right]Where A is future value, P is initial principal, r is annual nominal interest rate, n is compounding frequency per year, t is time in years, and PMT is periodic deposit.
Worked Example
Scenario: Invest $10,000 at 7% annual interest for 10 years compounded monthly with no extra additions.
Initial Principal: $10,000.
Monthly rate: 0.07 / 12 = 0.005833.
Periods: 10 × 12 = 120 months.
Formula: 10,000 × (1.005833)^120 = $20,096.61.
Tips & Key Notes
- The Rule of 72 provides a mental shortcut: divide 72 by your annual interest rate to approximate how many years it takes for your investment to double (e.g., 72 / 7% ≈ 10.3 years).
- Starting early is vastly more impactful than investing large sums later, thanks to the compounding duration.
Frequently Asked Questions
What is the difference between simple interest and compound interest?
Simple interest is computed solely on the original principal amount. Compound interest is computed on the initial principal plus all accrued interest from previous compounding cycles.
How does compounding frequency affect total return?
Higher compounding frequencies (e.g. daily vs. annual) generate slightly more interest over time because earnings start earning interest sooner.
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