See how your money grows exponentially with the power of compounding.
A compound interest calculator shows how your savings or investments grow when interest earns interest over time. The formula used is:
A = P(1 + r/n)nt
Where A = final amount, P = principal, r = annual rate, n = compounding frequency per year, t = years. For example, $10,000 at 7% compounded monthly for 10 years grows to approximately $20,096.
Compound interest is calculated using A = P(1 + r/n)^(nt), where P is the principal, r is the annual rate, n is the number of compounding periods per year, and t is the number of years. The more frequently interest compounds, the more you earn.
What is the difference between simple and compound interest? +
Simple interest is calculated only on the original principal (I = P × r × t). Compound interest is calculated on both the principal and accumulated interest, resulting in exponential growth over time.
Which compounding frequency is best? +
More frequent compounding (daily vs. annually) yields slightly higher returns. For a 7% annual rate, daily compounding gives an effective rate of 7.25% vs. exactly 7% for annual compounding. The difference is small but adds up over decades.
How does the Rule of 72 work? +
Divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 8% interest, your investment doubles in approximately 72 ÷ 8 = 9 years.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, compound interest causes your money to grow exponentially over time.
What is the compound interest formula?
The compound interest formula is A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times interest compounds per year, and t is the number of years.
How often should interest compound?
Common compounding frequencies are annually (1x), semi-annually (2x), quarterly (4x), monthly (12x), and daily (365x). More frequent compounding yields slightly higher returns. Continuously compounding uses A = Pe^(rt).
How long to double my money at 7% interest?
Using the Rule of 72: divide 72 by the interest rate. At 7%, your money doubles in approximately 72/7 = 10.3 years with annual compounding.