Compound Interest Calculator
Last updated:
Pick a starting amount, a rate, and a time horizon. We compound period by period and show you the final balance plus a year-by-year growth chart.
Compounding
Final Amount
$40,387.39
Interest Earned
$30,387.39
Multiplier
4.04×
Final / initial
Growth over 20 years
Principal stays flat; the gap between the two lines is your interest.
What is compound interest?
Compound interestis interest you earn on both your original deposit and on the interest that deposit has already earned. Each period the balance grows by the rate. The next period's interest is then calculated against that bigger balance, so growth speeds up over time. It's the engine behind every savings account, CD, index fund, and bond yield you'll ever own.
The opposite is simple interest, which always pays out on the original principal and never on the interest you've already earned. Over short periods the two look almost identical. Over decades they pull apart dramatically. At 8% for 30 years, $10,000 grows to $40,000 with simple interest but roughly $100,000 with compound. That gap, the snowball effect, is the single most important idea in personal finance.
How to calculate compound interest manually
The compound interest formula, with principal P, annual rate r (as a decimal), compounding frequency n per year, and time t in years:
Worked example: $10,000 invested at 7% compounded monthly for 20 years. P = 10,000, r = 0.07, n = 12, t = 20. Plug it in: A = 10,000 × (1 + 0.07/12)12 × 20 ≈ 10,000 × (1.005833)240 ≈ $40,387. Your principal didn't change. $30,387 of interest piled up on top. Toggle the compounding frequency above and watch the result shift: daily compounding adds a few hundred extra dollars over monthly at the same rate.
Real-world examples
High-yield savings
$5,000 · 4.5% · 10 years · monthly
≈ $7,830 · interest $2,830
What an emergency fund earns by sitting in a high-yield savings account, untouched, compounded monthly.
Index fund nest egg
$20,000 · 8% · 30 years · annually
≈ $201,253 · interest $181,253
One-time deposit into a broad index fund averaging 8% per year. Left alone for 30 years.
CD ladder
$25,000 · 5% · 5 years · quarterly
≈ $32,068 · interest $7,068
A short-term certificate of deposit with quarterly compounding. Predictable and federally insured.
Common mistakes when projecting compound returns
- Forgetting to subtract inflation. A 7% return at 3% inflation is really 4% in real purchasing power. For long horizons, always run the numbers in inflation-adjusted (real) returns or you'll over-project by 30 to 50%.
- Assuming returns are constant. Real markets don't deliver a smooth 8% per year. They swing from −30% to +25% around a long-run average. The compound formula uses an average rate, which is correct on paper but hides sequence-of-returns risk over shorter periods.
- Ignoring taxes and fees. A 1% advisory fee compounded over 30 years quietly eats about 25% of your final balance. Same for taxes on dividends and capital gains in a taxable account. Use net-of-fees, net-of-taxes rates.
- Mixing nominal and effective rates. A bank quoting “5% APR compounded daily” actually yields slightly more than 5%. Make sure the rate you enter matches the compounding frequency you pick, or convert first.
- Treating one big deposit like ongoing contributions. This calculator models a single lump sum left to compound. If you plan to add money monthly as well, use the SIP calculator. The math is different.
Frequently asked questions
- Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus accumulated interest, so each period your interest earns interest. Over decades, the gap is enormous — Albert Einstein supposedly called it 'the most powerful force in the universe'.
- Yes, but with diminishing returns. Going from yearly to monthly compounding adds meaningful return; going from monthly to daily adds very little. At a 7% rate, $10,000 over 30 years grows to about $76,123 yearly, $81,165 monthly, and $81,651 daily.
- For US savings accounts, 4–5% is common in 2025. For long-term stock-market investing, the historical S&P 500 average is roughly 10% nominal (about 7% after inflation). Crypto and individual stocks vary wildly and can also lose 50%+ in bad years.
- This calculator shows nominal returns. To get real (inflation-adjusted) returns, subtract your expected inflation rate from your nominal rate before entering it. If you expect 7% returns and 3% inflation, use 4% to see the result in today's dollars.
- For monthly contributions, use our SIP calculator instead — it's purpose-built for that. This calculator models a single deposit growing untouched.
- A back-of-the-envelope shortcut: divide 72 by your annual rate to estimate how many years it takes for your money to double. At 8%, money doubles roughly every 9 years (72 ÷ 8). At 6%, every 12 years. It works because of how compounding behaves at moderate rates and small time scales.
- Yes, in most taxable accounts. Interest earned in a regular savings account or CD is reported as income for the year it accrues, even if you don't withdraw it. Inside a tax-advantaged account (IRA, 401(k), ISA), compounding happens tax-free or tax-deferred — a major reason these accounts outperform identical investments in a taxable wrapper.
- Not with a positive rate. The formula always produces growth when rate > 0. If you're trying to model a declining investment (negative real returns or active losses), use a negative rate — the calculator will show your principal shrinking instead.
Related calculators
Pair this with another tool to run the full numbers.
Want to try a different angle?
Pair this with the converter or another calculator.