Compound Interest Calculator
See how your investment grows over time thanks to the power of compounding. Read the guide →
For educational purposes only. Calculator results are estimates based on the inputs you provide and are not a substitute for professional financial advice. Consult a licensed financial advisor before making investment, borrowing, or retirement decisions.
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What is compound interest?
Compound interest is interest calculated not just on your original principal, but also on the accumulated interest from previous periods. This creates a snowball effect — the longer your money grows, the faster it accelerates. Albert Einstein reportedly called it the "eighth wonder of the world."
The key difference from simple interest is reinvestment. With simple interest, you earn the same fixed amount every year. With compound interest, each year's earnings are added to the base, so next year's earnings are calculated on a larger amount.
The formula is: A = P(1 + r/n)^(nt) — where P is principal, r is annual rate, n is compounding frequency, and t is time in years.
How to use this calculator
- Initial Investment — Enter the amount you are starting with (your principal).
- Annual Interest Rate — Enter the expected yearly return. For stock market estimates, 7–10% is commonly used based on historical averages.
- Compounding Frequency — Choose how often interest compounds. Monthly compounding is the most common for savings accounts and many investments.
- Time Period — Enter the number of years you plan to let the investment grow.
- Click Calculate to see your final balance, total interest earned, and a year-by-year breakdown.
The Rule of 72
A quick mental shortcut: divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 8%, your money doubles in roughly 9 years (72 ÷ 8). At 6%, it takes about 12 years. This rule works surprisingly well for rates between 2% and 20%.
Frequently asked questions
Does compounding frequency really matter?
Yes, but the difference is often smaller than people expect. Going from annual to monthly compounding on a 7% rate adds roughly 0.23% effective yield. The bigger lever is always the interest rate and the time horizon.
What annual rate should I use for stock market investments?
The US stock market (S&P 500) has returned roughly 7–10% annually over long periods after inflation. For conservative planning, 6–7% is a reasonable assumption. Past returns do not guarantee future results.
Why does starting early matter so much?
Because the gains in later years are dramatically larger. With $10,000 at 8%, you earn $800 in year 1 but over $3,700 in year 20. The last decade of a 30-year investment can contribute more than the first two decades combined.
Does this calculator include regular contributions?
This calculator focuses on lump-sum compound growth. If you want to model regular monthly contributions (like a retirement account), the FIRE Number calculator gives you a related perspective on portfolio targets.
Real examples of compound interest
$10,000 invested at 8% for 30 years
A one-time investment of $10,000 at an 8% annual return compounded monthly grows to $109,357 after 30 years — nearly 11x your original investment. The first 10 years add $12,589, but the final 10 years alone add $50,561, illustrating why time is the most powerful variable.
$500 per month invested at 7% for 20 years
Investing $500 per month at 7% annually for 20 years results in a balance of approximately $260,000. You contribute $120,000 over that period, but compounding generates around $140,000 in gains — more than you put in. In the final 5 years alone, your balance grows by roughly $85,000.
Starting at 25 vs 35 — the 10-year difference
Investing $300 per month at 7% starting at age 25 produces approximately $788,000 by age 65. Starting the same plan at 35 produces only $366,000 — less than half — despite the 10-year delay costing just $36,000 more in contributions. The extra $422,000 is entirely the result of compounding having 10 more years to work.