Compound Interest Calculator

How it works

Compound interest adds earned interest back to the balance, so the next period earns on a larger amount. The two drivers are the rate and the compounding frequency: monthly compounding pays 12 small interest credits a year, and each one earns its own interest afterwards.

This calculator is the foundation for savings plans, certificate of deposit projections and the math behind any long-term growth estimate.

Formula

A = P (1 + r/n)nt

P = principal, r = annual rate as a decimal, n = compounding periods per year, t = years, A = future value.

Worked example

Example: $1,000 at 5% compounded monthly for 10 years. Monthly rate = 5%/12, periods = 120. A = 1000 × (1 + 0.004167)^120 = $1,647.01, of which $647.01 is interest.

What to know

Compounding frequency matters more than most people expect. On a 5% rate over 20 years, annual compounding grows $1,000 to $2,653, monthly to $2,712, and daily to $2,718. The frequency advantage is real but modest; the bigger lever is the rate itself and the number of years.

This is why starting early beats starting larger: the years sit in the exponent. A 25-year-old investing $200 a month with compounding will likely end with more than a 40-year-old investing $400 a month, purely because of extra decades of compounding.

Interest on interest takes a while to show up, which is why long horizons matter. The same $10,000 at 7% grows to $19,672 in ten years, $38,697 in twenty, and $76,123 in thirty — the later years contribute the most because the balance is largest.

FAQ

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