Compound Interest Calculator
See how your money grows over time with compound interest. Enter your starting amount, monthly contributions, interest rate, and time to reveal the power of compounding.
Track Your Savings Goals
Seeing the numbers is motivating — but tracking your actual progress is what makes compound interest real. Our Notion Budget Tracker helps you record every contribution and stay on course.
Get the Budget Tracker →What Is Compound Interest?
Compound interest is interest calculated on both your original principal and the accumulated interest from previous periods. In plain terms: your interest earns interest. Over time, this creates exponential growth — the longer you wait, the faster the number climbs.
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 periods per year, t is time in years, and PMT is regular contributions.
The Rule of 72
A quick mental shortcut: divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 7% annual return, money doubles in roughly 10 years (72 ÷ 7 = 10.3). At 10%, it doubles in about 7.2 years.
Why Monthly Contributions Matter More Than You Think
Starting with $0 and contributing $300/month at 7% for 30 years grows to approximately $340,000 — even though you only contributed $108,000 out of pocket. The remaining $232,000 is pure compound interest. This is why consistent monthly investing beats trying to invest a lump sum later.
Compounding Frequency Explained
- Daily: Most aggressive compounding — interest calculated every day. Common in savings accounts.
- Monthly: Very common for savings accounts and investment accounts.
- Quarterly: Some bonds and CDs compound quarterly.
- Annually: Simple investment scenarios — least favorable compounding.
The difference between daily and annual compounding at typical savings rates is small (less than 0.1% effective difference), but it adds up over decades.
Related Tools and Resources
- Savings Goal Calculator
- Investment Return Calculator
- Retirement Savings Calculator
- How to Save for a Down Payment
- Emergency Fund Budget Template
Frequently Asked Questions
What interest rate should I use for retirement savings?
The S&P 500 has historically returned about 7% annually after inflation. Many financial planners use 6-7% as a conservative estimate for long-term equity investments. For bonds or CDs, use current market rates (2-5% depending on term).
Does this calculator account for inflation?
No — these are nominal returns. To estimate real (inflation-adjusted) growth, subtract the annual inflation rate (historically ~2-3%) from your interest rate input. For example, at 7% returns and 3% inflation, enter 4% for inflation-adjusted projections.
How is compound interest different from simple interest?
Simple interest only calculates on the original principal. Compound interest calculates on principal plus accumulated interest. On $10,000 at 5% for 10 years: simple interest = $5,000 extra; compound interest = $6,289 extra — a 25% difference that grows with time.
Should I pay off debt or invest?
If your debt interest rate exceeds your expected investment return, pay off debt first. Credit card debt at 20% APR will always beat expected investment returns of 7%. But for low-interest debt (under 4%), investing often makes mathematical sense simultaneously.