Compound Interest Calculator
See the power of compound interest. Enter your starting balance, monthly contributions, and expected return rate to watch your money grow.
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. The formula is A = P(1 + r/n)nt, where A is the final amount, P is the principal, r is the annual rate, n is compounding frequency per year, and t is time in years. At 7% annual return, money doubles approximately every 10.3 years (Rule of 72).
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How Compound Interest Works
Compound interest is interest earned on both your original investment and on previously earned interest. Over time, this creates exponential growth. The formula is: A = P(1 + r/n)nt, where A is the final amount, P is the principal, r is the annual rate, n is the compounding frequency, and t is time in years.
When you also make regular contributions, the formula becomes more complex but the principle is the same: each contribution starts earning compound interest from the moment it's added. This is why starting early matters so much — even small amounts contributed in your 20s can grow dramatically by retirement.
The Rule of 72
A quick way to estimate how long it takes to double your money: divide 72 by your annual return rate. At 7% return, your money doubles approximately every 10.3 years. At 10%, every 7.2 years.
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What Is Compound Interest?
Compound interest is interest calculated on both the initial principal and all previously accumulated interest — creating exponential growth. $10,000 at 8% simple interest for 30 years = $34,000. At 8% compound interest = $100,627. Add $500/month contributions and the compound total reaches $745,000.
Compound interest works in your favor when saving (wealth grows exponentially) but against you when borrowing (debt spirals). This dual nature is fundamental to every financial decision — from savings to credit card debt to retirement.
The Power of Starting Early
Alex starts at 25, invests $300/month for 40 years at 8%. Contributed: $144,000. Balance: $1,045,000. Jordan starts at 35, invests $600/month for 30 years. Contributed: $216,000. Balance: $894,000.
Alex invested $72,000 less but ended up $151,000 more — 10 extra years of compounding beat doubling the contribution. Start with your 401K match, then open a Roth IRA.
Frequently Asked Questions
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To project a specific investment's growth, use our Future Value Calculator or Investment Calculator for lump sums. Measure past performance with the ROI Calculator. Planning for retirement? Our 401K Calculator models employer matching and compound growth together. Read our blog post on how $500/month can grow to $1 million. For college savings, our College Savings Calculator uses compound growth with tuition inflation.