What is compound interest?
Compound interest is interest paid on both the original principal and on previously earned interest. Over time it grows faster than simple interest because each period's interest joins the pool that earns the next period's interest.
A = P × (1 + r/n)^(n·t)
where:
- A = final amount
- P = initial principal
- r = annual interest rate (as a decimal; enter the % above)
- n = number of compoundings per year
- t = number of years
How to use
- Initial investment — what you start with.
- Annual rate (%) — the stated yearly rate. For 6%, enter
6. - Years invested — the time horizon.
- Compoundings per year — how often interest is added back to the principal. Common values: 1 (annual), 12 (monthly), 365 (daily).
The final amount and total interest earned are computed instantly.
Compounding frequency examples
A class="jsx-43013d48d08af43a site-content "0,000 investment at 6% annual over 10 years:
| Compoundings | Final amount | |---|---| | 1 (annual) | class="jsx-43013d48d08af43a site-content "7,908.48 | | 12 (monthly) | class="jsx-43013d48d08af43a site-content "8,193.97 | | 365 (daily) | class="jsx-43013d48d08af43a site-content "8,220.29 |
More frequent compounding earns slightly more, but the marginal benefit drops sharply past monthly.
FAQ
What's the difference between this and simple interest?
Simple interest is I = P × r × t — fixed amount each period, no compounding. Compound interest re-invests the interest, so growth is exponential rather than linear.
How long until my money doubles?
The "Rule of 72" gives a quick estimate: doubling time ≈ 72 / annual rate. At 6%, money doubles in ~12 years. At 9%, ~8 years.
What if I add contributions over time?
This calculator handles a single lump sum. For regular monthly or yearly contributions, you need a slightly different formula that adds an annuity component — that's a separate calculator.
Do I need to enter the rate as a decimal or a percentage?
Enter it as a percentage (e.g. 6 for 6%). The formula handles the divide-by-100 internally.