Compound Interest Calculator
See how your investments grow with the power of compound interest. This calculator accounts for initial investment, regular monthly contributions, interest rate, compounding frequency, and time horizon.
Compound Interest Calculator
finance calculator
How It Works
Compound interest means you earn interest on both your initial investment and on the interest already earned. This creates exponential growth over time — commonly called the "snowball effect."
Formula
A = P(1 + r/n)^(nt) + PMT × [(1 + r/n)^(nt) − 1] / (r/n) Where: P = Principal, r = Annual Rate, n = Compounding Periods, t = Years, PMT = Monthly Payment
Examples
$10K investment, $500/month, 7% for 20 years
Typical retirement savings scenario.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest. Unlike simple interest, compound interest grows exponentially because you earn "interest on interest."
How often should interest compound?
More frequent compounding (daily vs. annually) results in slightly higher returns. For long-term investments, the difference between monthly and daily compounding is minimal.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your investment. Divide 72 by the annual interest rate. For example, at 8% annual growth, money doubles in approximately 9 years (72 ÷ 8 = 9).
What is a realistic long-term return?
The S&P 500 has historically returned about 7-10% annually (inflation-adjusted 5-7%). Most financial planners use 6-8% as a conservative long-term average.
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