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Compound Interest Calculator

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Enter an initial investment, rate, and time to see how compound interest grows your money.

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What is compound interest?

Compound interest is interest calculated on both the original amount you invested (the principal) and on the accumulated interest from previous periods. Because each new round of interest earns its own interest, a balance that compounds grows faster than one earning only simple interest, and the gap widens dramatically over time.

How is compound interest calculated?

The standard compound interest formula is:

A equals P times open parenthesis 1 plus r over n close parenthesis raised to the power of n times t
  • A: final amount (principal + interest)
  • P: principal (initial investment)
  • r: annual interest rate, as a decimal (7% = 0.07)
  • n: number of compounding periods per year
  • t: time in years

Example: $10,000 at 7% for 30 years, compounded annually

A equals 10,000 times open parenthesis 1 plus 0.07 close parenthesis raised to the power of 30, which is approximately 76,123 dollars

Note: The formula above covers a single lump sum. When you also make regular contributions, the full balance is the future value of the lump sum plus the future value of the contribution stream. The calculator handles both automatically.

Compound interest vs simple interest

Simple interest pays interest only on the original principal, so the yearly interest amount never changes. Compound interest pays interest on the principal and on previously earned interest, so each year’s interest is slightly larger than the last. Over short horizons the two are close. Over decades, compounding wins by a wide margin.

Metric Formula $10k at 7% for 30 years
Simple Interest A = P(1 + rt) $31,000
Compound Interest A = P(1 + r/n)nt $76,123

How does compounding frequency affect returns?

The more often interest compounds, the more you earn, but the benefit has sharply diminishing returns. Below is the final balance of $10,000 invested at 7% for 30 years, varying only the compounding frequency:

Compounding frequency Periods per year (n) Final balance
Annually 1 $76,123
Semi-annually 2 $78,781
Quarterly 4 $80,192
Monthly 12 $81,165
Daily 365 $81,645

Moving from annual to monthly compounding adds roughly $5,000 over 30 years. Moving from monthly to daily adds less than $500. Beyond daily, the differences become negligible for everyday use.

The power of regular contributions

Adding steady contributions on top of a lump sum transforms the outcome. The table below shows the same $10,000 at 7% for 30 years (compounded annually), first on its own and then with $500 added every month:

Scenario Total contributed Interest earned Final balance
Lump sum only $10,000 $66,123 $76,123
Lump sum + $500/month $190,000 $489,255 $679,255

Adding $500 a month turns a ~$76k outcome into a ~$679k outcome (roughly 8.9× larger) because every contribution buys another 30 years of compounding for that dollar.

Worked examples

Retirement: $10,000 start + $500/month for 30 years at 7%

Initial $10,000 · $500/month contributions · 7% annual rate, compounded annually · 30 years

Final balance: ≈ $679,255. The starting $10,000 grows to about $76,123 on its own. The monthly contributions do most of the work, growing to roughly $603,000 by year 30. Total contributed: $190,000. Interest earned: about $489,000.

College fund: $5,000 start + $200/month for 18 years at 6%

Initial $5,000 · $200/month contributions · 6% annual rate, compounded annually · 18 years

Final balance: ≈ $92,525. A parent funding a newborn’s college account contributes $48,200 over 18 years and ends with about $92,525. The remaining $44,325 is interest earned along the way.

Emergency fund in a high-yield savings account (HYSA): $5,000 at 4% for 3 years

Initial $5,000 · no monthly contributions · 4% annual rate, compounded monthly (HYSA) · 3 years

Final balance: ≈ $5,636. A flat $5,000 parked in a high-yield savings account at 4% grows by about $636 over three years. Short horizons and modest rates produce modest compounding, but the $636 would not have been earned in a non-interest-bearing account.

Young saver: $0 start + $100/month for 40 years at 7%

Initial $0 · $100/month contributions · 7% annual rate, compounded annually · 40 years

Final balance: ≈ $254,934. Forty years of $100 contributions totals $48,000 of cash out of pocket, while the ending balance is more than five times that. This scenario illustrates how an early start lets each contributed dollar compound for longer.

Certificate of deposit (CD): $20,000 at 4.5% for 5 years

Initial $20,000 · no contributions · 4.5% annual rate, compounded monthly (CD) · 5 years

Final balance: ≈ $25,036. A $20,000 balance locked into a 5-year certificate of deposit at 4.5% earns about $5,036. Fixed-income products offer predictable compounding at the cost of flexibility: the money is not accessible without an early-withdrawal penalty.

Frequently Asked Questions

What's the difference between compound interest and CAGR?
Compound interest is the ongoing process of interest being reinvested so future interest is earned on prior interest. CAGR (Compound Annual Growth Rate) is a measurement: the single annualized rate that would have produced the observed change from a start value to an end value. Our CAGR calculator handles the reverse direction: given two values and a time span, what rate connects them?
How often does interest typically compound?
It depends on the product. Most high-yield savings accounts compound daily and credit it monthly. Certificates of deposit (CDs) commonly compound daily or monthly. Mortgages in the U.S. compound monthly. Credit cards usually compound daily on the average daily balance. Bonds pay coupons semi-annually and do not compound unless you reinvest.
What is the rule of 72?
The rule of 72 is a quick way to estimate how long it takes money to double at a given interest rate. Divide 72 by the annual rate (as a whole number): at 6% your money doubles in about 12 years; at 9% it doubles in about 8 years. It is an approximation, most accurate between roughly 4% and 12%.
What's the difference between APR and APY?
APR (Annual Percentage Rate) is the yearly rate quoted on a loan or account before compounding is applied; on loans it typically also includes certain required fees. APY (Annual Percentage Yield) is the effective yearly rate you actually earn after compounding is factored in. A 7% APR compounded monthly equals an APY of about 7.23%. When comparing savings products use APY; when comparing loan costs compare APRs on equal terms.
Does compound interest work against me with debt?
Yes. The same mechanics that grow a savings balance also grow an unpaid debt balance. Credit cards are especially punishing because they compound daily on a high APR and interest accrues on any unpaid interest from the previous cycle. The compounding loop only stops once the balance (not just the minimum payment) is cleared.
Does compound interest outpace inflation?
Only if your rate of return is higher than the inflation rate. If your savings earn 4% while inflation runs at 3%, your real (inflation-adjusted) return is only about 1%. Historically, broad stock-market returns have exceeded inflation over long horizons, while cash and short-term savings have not always kept up. The calculator above shows nominal growth; subtract expected inflation to think in real terms.
How do I calculate compound interest in Excel or Google Sheets?
For a lump sum with no contributions, use the FV function: =FV(rate, periods, pmt, -P). With annual compounding, =FV(0.07, 30, 0, -10000) returns about $76,123. To match a different compounding frequency, divide the rate by n and multiply the periods by n: =FV(0.07/12, 360, 0, -10000) gives about $81,165 for monthly compounding.

For regular contributions, pass the recurring deposit as the pmt (payment) argument on the same period basis as the rate. For $500 at the end of each month with monthly compounding: =FV(0.07/12, 360, -500, -10000) returns about $691,150. If you deposit at the start of each month, add the optional type argument: =FV(0.07/12, 360, -500, -10000, 1) returns about $694,709. Note that Excel assumes one contribution per compounding period, so results differ slightly from the calculator above when you mix (for example) annual compounding with monthly deposits.

The negative signs represent cash leaving your pocket; the positive result is what you would have at the end.
Which factors influence the final balance the most?
Three factors mathematically drive the final balance: the time horizon, the rate of return, and the size and frequency of contributions. Because early contributions have the longest runway, a dollar contributed ten years earlier compounds more than the same dollar contributed later at the same rate. Reinvested dividends and interest stay inside the compounding loop rather than leaving it. Tax-advantaged accounts (where eligible) reduce the annual tax drag on compounding. This describes the math, not a recommendation. Rules, eligibility, and suitability vary by country and individual circumstances.

Related calculators

CAGR Calculator

If you already know what the investment grew from and to, use CAGR to find the yearly rate, with optional inflation adjustment.