Compound Interest Calculator

This calculator shows how much an investment or savings account will grow using compound interest. You provide the starting principal, any recurring monthly contributions, the annual interest rate, the number of years, and how often interest compounds. The tool then projects your final balance, total contributions, and total interest earned. It also generates a year-by-year breakdown so you can see exactly how the growth accelerates over time. Unlike simple interest calculators, this tool accounts for interest earned on previously accumulated interest, which is the key driver of long-term wealth building.

The core compound interest formula is A = P(1 + r/n)^(nt), where A is the future value of the investment, P is the principal, r is the annual interest rate expressed as a decimal, n is the number of compounding periods per year, and t is the number of years. The term (1 + r/n) represents the growth factor for each compounding period, and raising it to the power of (nt) applies that growth across every period in the investment horizon.

When regular contributions are added, the formula expands to include an annuity component. The full expression becomes A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) – 1) / (r/n)], where PMT is the periodic contribution adjusted for the compounding frequency. Compounding frequency matters significantly: monthly compounding (n = 12) yields more than annual compounding (n = 1) because interest is added to the principal twelve times per year instead of once. A useful mental shortcut is the Rule of 72: dividing 72 by your annual rate approximates the years needed to double your money. At 7.2%, an investment doubles in roughly a decade.

Imagine you invest $10,000 at an annual rate of 7%, compounded monthly, with no additional contributions. Over twenty years, the calculation is $10,000 × (1 + 0.07/12)^(12×20) = $10,000 × (1.005833)^240 = $40,417. Compare this to simple interest on the same principal and rate: $10,000 + ($10,000 × 0.07 × 20) = $24,000. Compound interest earns an additional $16,417. Now add a $500 monthly contribution. The principal grows to $40,417, and the contributions accumulate to roughly $260,000 in deposited funds plus $159,000 in interest on those contributions, yielding a total balance near $403,000. The majority of the final amount comes from interest, not from money you put in.

Retirement planning is one of the most common applications. By entering your current retirement account balance, expected annual return, monthly contributions, and years until retirement, you can project whether you are on track to meet your goals. Small adjustments, such as increasing contributions by $100 per month or extending your timeline by five years, often produce surprisingly large differences in the final balance. Use our retirement calculator to see the full picture including Social Security and inflation.

Savings account comparison is another practical use. Banks advertise interest rates, but the true yield depends on compounding frequency and APY. This calculator lets you model identical deposits across different banks to see which account actually pays more over your intended time frame. For dedicated savings projections, try our savings calculator which includes goal deadlines and contribution tracking. Investment growth projections help you evaluate whether a proposed portfolio allocation is likely to deliver the returns you need for a major purchase, such as a home down payment or a child's education fund.

On the liability side, understanding compound interest helps you grasp the true cost of debt. Credit cards compound daily, which is why carrying a balance becomes expensive so quickly. Our loan calculator and credit card payoff calculator show exactly how much interest you will pay over time. You can also use this calculator in reverse when comparing loan offers: a lower nominal rate with less frequent compounding might actually cost less than a slightly higher rate with daily compounding. Finally, anyone evaluating bank certificates of deposit or bonds can model holding-period returns under different reinvestment assumptions.

For investor education, financial literacy resources, and regulatory guidance on interest disclosures, see the U.S. Securities and Exchange Commission (SEC) Investor.gov.