Compound Interest Calculator
Project investment growth with optional monthly contributions and year-by-year breakdown.
What is compound interest?
Compound interest is interest calculated on both the original principal and the accumulated interest from previous periods. Unlike simple interest (which only applies to the principal), compounding causes your money to grow exponentially over time. Albert Einstein is often (perhaps apocryphally) quoted as calling it the "eighth wonder of the world." The formula is: A = P(1 + r/n)^(nt), where P is the principal, r is the annual rate, n is the compounding frequency, and t is time in years.
Frequently asked questions
How much does compounding frequency matter?
The difference between annual and daily compounding is real but often smaller than people expect. At 7% for 10 years on $10,000: annual compounding gives $19,672; daily compounding gives $20,068 — a difference of about $400. The rate itself matters far more than the frequency.
What is the Rule of 72?
The Rule of 72 is a quick mental shortcut: divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 6% per year, your money doubles in about 12 years (72 ÷ 6). At 9%, it doubles in about 8 years. The rule works well for rates between 1% and 25%.
How is the monthly contribution factored in?
Regular contributions use the future value of an annuity formula: FV = PMT × ((1 + r/n)^(nt) − 1) / (r/n), where PMT is the monthly contribution. This assumes contributions are made at the end of each compounding period. The result is added to the compounded principal to give the total.
