Compound Interest Calculator
Calculate the future value of a lump sum investment with compound interest. Choose your compounding frequency and see how the “compound bonus” compares to simple interest over time.
Compound vs simple interest
Simple interest is calculated only on the original principal. A 7% return on $10,000 earns $700 every year, regardless of how long the money is invested.
Compound interestis calculated on both the principal and the accumulated interest. In year 2, your 7% return applies to $10,700 — earning $749. In year 3, it applies to $11,449 — earning $801. This exponential growth is what Albert Einstein is famously (if apocryphally) quoted as calling “the eighth wonder of the world.”
The compound interest formula is: A = P × (1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding periods per year, and t is time in years.
How compounding frequency affects growth
More frequent compounding means interest is calculated on interest more often, leading to slightly higher returns. However, the difference between monthly and daily compounding is relatively small compared to the difference between annual and monthly.
For $10,000 at 7% over 30 years: annual compounding yields $76,123; monthly compounding yields $81,164; daily compounding yields $81,645. The difference between monthly and daily is only $481 over 30 years.
Frequently asked questions
What rate should I use for an investment?
For a globally diversified equity portfolio (such as an index fund), 6–8% is a commonly used long-term nominal return assumption based on historical data. Inflation-adjusted (real) returns have historically been 5–6%. For bonds or savings accounts, use current yields. Always use conservative estimates for financial planning.
Does this include regular contributions?
This calculator covers lump sum compound interest only. For calculations that include monthly contributions (regular investing), use our Investment Growth Calculator which handles both a starting amount and ongoing contributions.
How does compound interest affect debt?
Compound interest works against you when you are in debt. Credit card debt compounds monthly — if you carry a $5,000 balance at 20% APR and make no payments, it doubles in approximately 3.6 years. This is why high-interest debt should be paid off before focusing on investment compounding.
