Compound Interest Calculator

Why compounding speeds up over time

Simple interest pays a percentage of your original amount. Compound interest pays interest on your interest: each period's gains are added to the balance, and the next period is calculated on the new, larger total.

The effect is small at first and then accelerates, because the base keeps growing. Over long periods this curve bends sharply upward, which is why starting early often matters more than the exact amount you put in.

Frequency, and the Rule of 72

How often interest compounds affects the result. Monthly or daily compounding grows a little faster than annual compounding at the same rate, because gains are reinvested sooner.

A handy shortcut is the Rule of 72: divide 72 by the annual rate to estimate how many years it takes money to double. At 6 percent that is about 12 years; at 8 percent, about 9. It also makes the cost of a lower return, or a higher-interest debt, easy to picture.

What is compound interest?

Compound interest is interest calculated on your initial principal plus all the interest that has accumulated in previous periods, so your balance grows faster over time than with simple interest.

Why does compounding frequency matter?

The more often interest compounds (daily vs. yearly), the more total interest you earn, because earned interest starts generating its own interest sooner.

What is the compound interest formula?

A = P(1 + r/n)^(nt), where P is principal, r is the annual rate, n is the number of compounding periods per year and t is the number of years.

Can I model regular deposits?

Yes. Adding a monthly contribution shows how consistent investing dramatically increases your final balance thanks to compounding.