Compound Interest Calculator
Calculate how your investments grow over time with compound interest
Enter values to see results
Fill in the form and click Calculate
How to Use This Calculator
Enter your initial investment amount, monthly contribution, expected annual interest rate, time period, and compounding frequency. The calculator will show you the future value of your investment, total contributions, and how much interest you will earn.
Understanding Compound Interest
Compound interest is one of the most powerful concepts in finance. Unlike simple interest, which is calculated only on the principal amount, compound interest is calculated on both the principal and the accumulated interest from previous periods.
This means your money grows exponentially over time. The longer you invest and the more frequently your interest compounds, the more your money will grow.
The Compound Interest Formula
A = P(1 + r/n)nt
- A = Final amount (future value)
- P = Principal (initial investment)
- r = Annual interest rate (decimal)
- n = Number of times interest compounds per year
- t = Number of years
Example Calculation
If you invest $10,000 at 7% annual interest, compounded monthly, for 10 years:
- Future Value: $20,096.61
- Total Interest Earned: $10,096.61
- Your money has doubled!
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods. This means your money grows faster over time as you earn interest on interest.
How often should interest compound?
More frequent compounding (daily vs. annually) results in slightly higher returns. However, the difference is usually small. Monthly or daily compounding is common for savings accounts and investments.
What is a good interest rate for investments?
The S&P 500 has historically returned about 7% per year after inflation. High-yield savings accounts offer 4-5% APY, while bonds typically return 3-5%. Your expected return depends on your risk tolerance.
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the simple interest rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding and shows the actual return you will earn in a year.