Free Compound Interest Calculator
Calculate how your investments grow over time with compound interest. See the power of compounding with different frequencies and monthly contributions.
Investment Details
Future Value
after 10 years
Future Value
$37,405
Interest Earned
$15,405
Total Invested
$22,000
APY
7.23%
Compounding Frequency Comparison
| Frequency | Final Amount | Interest Earned | Difference |
|---|---|---|---|
| Daily (365) | $37,512 | $15,512 | +$1,261 |
| Monthly (12) | $37,405 | $15,405 | +$1,154 |
| Quarterly (4) | $37,186 | $15,186 | +$935 |
| Semi-annually (2) | $36,866 | $14,866 | +$614 |
| Annually (1) | $36,251 | $14,251 | - |
How to Use the Compound Interest Calculator
Enter Your Initial Investment
Input your starting principal amount - the initial sum of money you plan to invest. This is the foundation of your compound interest calculation.
Set the Interest Rate and Compounding Frequency
Enter the annual interest rate as a percentage and select how often interest compounds (daily, monthly, quarterly, or annually). More frequent compounding yields higher returns.
Specify Time Period and Contributions
Enter the number of years you plan to invest. Optionally add regular monthly contributions to see how consistent investing accelerates your wealth building.
View Your Growth Projection
Click Calculate to see your final balance, total interest earned, and a year-by-year breakdown showing how compound interest grows your investment exponentially over time.
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Understanding Compound Interest
Compound interest is one of the most powerful concepts in finance. Albert Einstein reportedly called it "the eighth wonder of the world," noting that "he who understands it, earns it; he who doesn't, pays it." Unlike simple interest, compound interest earns returns on both your original investment and the accumulated interest.
Key Factors Affecting Growth
- Time: The longer your money compounds, the more dramatic the growth becomes
- Interest Rate: Higher rates accelerate growth exponentially
- Compounding Frequency: More frequent compounding produces higher returns
- Regular Contributions: Adding money regularly multiplies the compounding effect
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, which is only calculated on the principal, compound interest allows your money to grow exponentially over time, often called "interest on interest."
How does compounding frequency affect my returns?
More frequent compounding results in higher returns. Daily compounding yields more than monthly, which yields more than annual compounding. However, the difference becomes smaller with higher frequencies. For example, the difference between monthly and daily compounding is much smaller than between annual and monthly.
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 (as a decimal), n is the number of compounding periods per year, and t is the number of years.
What is APY vs APR?
APR (Annual Percentage Rate) is the stated interest rate without compounding. APY (Annual Percentage Yield) accounts for compounding and represents the actual yearly return. APY is always equal to or higher than APR, with the difference depending on compounding frequency.
How can I maximize compound interest growth?
To maximize compound interest: 1) Start investing early to give your money more time to grow, 2) Make regular contributions, 3) Choose investments with higher interest rates, 4) Reinvest all earnings, and 5) Choose investments that compound more frequently when possible.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes for an investment to double. Divide 72 by the annual interest rate to get the approximate years. For example, at 8% interest, your money doubles in about 72/8 = 9 years.
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