Compound Interest Calculator
See how your investments grow over time with compound interest
Final Balance
$300,851
Total Contributions
$130,000
Interest Earned
$170,851
Your investment of $10,000 with $500 monthly contributions will grow to $300,851 over 20 years at 7% annual return.
Compound interest is often called the 'eighth wonder of the world' because of its powerful wealth-building effect. Unlike simple interest which only earns on the principal, compound interest earns interest on your interest. This creates exponential growth over time, making it the foundation of long-term investing and retirement planning.
Formula:
A = P(1 + r/n)^(nt)Where A = final amount, P = principal, r = annual interest rate, n = times compounded per year, t = years
- 1
Enter your initial investment (principal) amount
- 2
Set your expected annual rate of return (historically 7-10% for stocks)
- 3
Add any regular monthly contributions you plan to make
- 4
Choose your compounding frequency (monthly is most common)
- 5
Select your investment time horizon
- 6
View your projected growth and total interest earned
- Starting early dramatically increases your final balance due to more compounding periods
- Even small regular contributions can grow to substantial amounts over decades
- Understanding compound interest helps you make better retirement planning decisions
- The Rule of 72 helps estimate doubling time: 72 ÷ rate = years to double
- Compound interest works against you with debt (credit cards, loans)
- Planning for retirement savings goals
- Calculating how long until you reach a savings target
- Comparing investment options with different returns
- Understanding the cost of waiting to invest
- Projecting college savings growth
- Evaluating the impact of fees on long-term returns
- •Increase contributions by 1% each year, especially when you get raises
- •Reinvest dividends to maximize compounding
- •Tax-advantaged accounts (401k, IRA) let more of your money compound
- •Time in the market beats timing the market for compound growth
Have questions about using this calculator? Check out our financial guides or contact us for help.
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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 only calculates interest on the principal, compound interest allows your money to grow exponentially over time as you earn 'interest on interest'.
How often should interest compound for maximum growth?
The more frequently interest compounds, the more your money grows. Daily compounding produces slightly more than monthly, which produces more than quarterly or annually. However, the difference between daily and monthly compounding is usually minimal - the bigger factors are your interest rate and time invested.
What is the Rule of 72?
The Rule of 72 is a simple way to estimate how long it takes to double your money. Divide 72 by your annual interest rate to get the approximate number of years. For example, at 8% interest, your money doubles in about 9 years (72 ÷ 8 = 9).
How much should I contribute monthly to reach my goals?
Use this calculator to experiment with different monthly contribution amounts. Generally, financial advisors recommend saving 15-20% of your income for retirement. Start with what you can afford and increase contributions by 1% annually, especially when you get raises.
What's a realistic rate of return to expect?
Historically, the S&P 500 has returned about 10% annually before inflation (7% after inflation). However, past performance doesn't guarantee future results. Conservative estimates use 6-7%, moderate estimates use 7-8%, and optimistic estimates use 8-10%.