Compound Interest Calculator

See how your money grows over time with the power of compound interest. Calculate future value with regular contributions and various compounding frequencies.

Investment Details

$
$
%
yrs

Enter your investment details and click "Calculate" to see how your money grows over time.

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Pro Tip

Start investing as early as possible. Thanks to compounding, $200/month from age 25 to 65 at 7% grows to over $525,000, while starting at 35 yields only about $243,000 -- less than half despite only 10 fewer years.

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Understanding Compound Interest

Compound interest is the interest calculated on the initial principal and also on the accumulated interest from previous periods. It is one of the most powerful concepts in finance and is often referred to as "interest on interest."

Unlike simple interest, which is calculated only on the principal amount, compound interest grows exponentially over time. The more frequently interest compounds, the faster your money grows. This is why Albert Einstein reportedly called compound interest the "eighth wonder of the world."

The frequency of compounding has a significant impact on growth. Daily compounding will yield slightly more than monthly, which yields more than quarterly or annually. However, the differences become smaller as frequency increases.

Regular contributions amplify the power of compounding dramatically. Even small monthly additions can result in substantial wealth over decades. The key factors are: starting early, contributing consistently, and allowing time for compounding to work.

Compound Interest Formula with Contributions

A = P(1 + r/n)nt + PMT × [((1 + r/n)nt − 1) / (r/n)]

Where:

A = Future value (final amount)

P = Principal (initial investment)

r = Annual interest rate (decimal)

n = Compounding frequency per year

t = Time in years

PMT = Regular contribution per period

Example

$10,000 initial investment with $200/month at 7% compounded monthly for 20 years:

  • • Initial investment grows: $10,000 x (1.00583)^240 = $40,387
  • • Monthly contributions grow: $200 x [((1.00583)^240 - 1) / 0.00583] = $104,185
  • • Total future value: $144,572
  • • Total contributed: $10,000 + ($200 x 240) = $58,000
  • • Total interest earned: $86,572

Frequently Asked Questions

What is the difference between compound and simple interest?
Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus all previously accumulated interest. Over time, compound interest grows exponentially, while simple interest grows linearly.
How often should interest compound for maximum growth?
More frequent compounding yields higher returns. Daily compounding produces slightly more than monthly, which beats quarterly and annual. However, the difference between daily and monthly compounding is minimal. The real power comes from the length of time you invest.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual interest rate. For example, at 7% interest, your money doubles in approximately 72/7 = 10.3 years.
Does this calculator account for taxes?
This calculator shows gross returns before taxes. In taxable accounts, you may owe taxes on interest and dividends annually. Tax-advantaged accounts like IRAs and 401(k)s let your money compound without annual tax drag.
How much should I invest monthly?
A common guideline is to save and invest at least 15-20% of your gross income. However, the best amount depends on your financial goals, timeline, and current expenses. Even small amounts benefit greatly from compounding over long periods.