Compound Interest Calculator
See how your money grows over time with compound interest. Calculate the future value of your savings with regular contributions.
Breakdown
What is Compound Interest?
Compound interest is interest earned on both the initial principal and previously accumulated interest. Unlike simple interest, compound interest grows exponentially over time, making it one of the most powerful concepts in finance.
The Compound Interest Formula
The 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.
The Rule of 72
A quick way to estimate how long it takes to double your money: divide 72 by the annual interest rate. At 7% interest, your money doubles approximately every 10.3 years.
Frequently Asked Questions
What is compound interest?
Compound interest is interest earned on both your initial deposit and the interest that has already accumulated. Unlike simple interest, which is only calculated on the principal, compound interest grows exponentially over time.
How does compound interest work?
Each time interest compounds (daily, monthly, quarterly, or annually), the earned interest is added to your balance. The next interest calculation is based on this new, larger balance. The more frequently interest compounds, the more you earn.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual interest rate. For example, at 7% interest, your money doubles in approximately 10.3 years (72 ÷ 7 = 10.3).
How do monthly contributions affect compound interest?
Regular monthly contributions dramatically boost your returns through dollar-cost averaging and a larger base for compounding. Even small monthly additions can result in significantly more wealth over decades compared to a one-time deposit.
Disclaimer
This calculator is for informational purposes only and should not be considered financial advice. Consult with a qualified financial professional before making any financial decisions.