Compound Interest Calculator
See how your savings and investments grow when interest is reinvested year after year
What Is a Compound Interest Calculator?
A compound interest calculator shows how your money grows when the interest you earn is reinvested and starts earning interest of its own. Unlike simple interest, which only applies to your original principal, compounding applies growth to your principal plus everything it has already earned, so balances rise faster the longer you leave them invested.
Common Uses
- Projecting retirement account balances after decades of consistent contributions
- Comparing savings account yields across different compounding frequencies
- Illustrating the cost of delaying investment contributions by several years
- Evaluating bond fund performance with reinvested dividend distributions
- Teaching financial literacy concepts about exponential growth visually
How to Use This Calculator
- Enter your starting balance as the initial lump sum
- Add a monthly contribution to model regular, ongoing deposits
- Use the nominal annual interest rate, not an advertised APY
- Choose a compounding frequency that matches your account type
- Check the year-by-year table to see when interest starts outpacing your contributions
Pro Tips
- Starting ten years earlier typically has a bigger impact on your final balance than increasing your contribution rate
- Daily compounding yields only marginally more than monthly; the difference matters mainly at very large balances
- The Rule of 72 gives a fast estimate of doubling time: divide 72 by your annual return percentage
- Small, regular increases to your contribution amount compound alongside your balance over time
- Tax-advantaged accounts, such as IRAs and 401(k)s, let more of your growth compound by deferring taxes
Frequently Asked Questions
What is the difference between compound and simple interest?
Simple interest is calculated only on your original principal. Compound interest is calculated on your principal plus all interest earned so far, so your balance grows faster over time.
Should I enter my APY or the nominal interest rate?
Enter the nominal annual rate, not the APY. APY already reflects the effect of compounding, so entering it and also selecting a compounding frequency will overstate your results.
How is compounding frequency different from contribution frequency?
Compounding frequency is how often interest is added to your balance. Contribution frequency is how often you add new money. This calculator compounds interest at the frequency you select while assuming contributions are made monthly.
Does this calculator account for taxes, fees, or inflation?
No. It projects gross growth at a fixed rate. Real returns will be lower after taxes, account fees, and inflation, so treat the results as an estimate rather than a guarantee.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how many years it takes an investment to double: divide 72 by your annual interest rate. At 6%, for example, your money would roughly double in 12 years.
Can this calculator predict actual stock market returns?
No. It applies a fixed rate you choose to model steady growth. Real investments fluctuate year to year, so actual results will differ from a straight-line projection.
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