Compound Interest Calculator
Calculate compound interest with different compounding frequencies
Compound Interest Details
Times per year (12 for monthly, 4 for quarterly, 365 for daily)
Future Value
$16,470.09
Interest Earned
$6,470.09
Our compound interest calculator shows how your money grows over time with compound interest. See the powerful effect of time and compounding frequency on your savings and investments.
What is calculators.compound-interest-calculator.title?
Compound interest is interest calculated on the initial principal plus accumulated interest from previous periods. It's often called 'interest on interest' and is the key to wealth building.
Unlike simple interest (calculated only on principal), compound interest grows your money exponentially over time. The more frequently interest compounds, the faster your money grows.
This calculator helps you understand compound interest, compare different compounding frequencies, and see how time dramatically affects your wealth accumulation.
How to Use This Calculator
- 1
Principal
Enter your initial investment or savings amount.
Tip: Even small amounts grow significantly over long periods with compound interest.
- 2
Annual Interest Rate
Input the annual interest rate or expected return.
Tip: Higher rates accelerate growth, but also come with higher risk for investments.
- 3
Time Period
Enter how many years you'll invest or save.
Tip: Time is the most powerful factor in compound interest. Starting early makes an enormous difference.
- 4
Compounding Frequency
Select how often interest compounds: annually, semi-annually, quarterly, monthly, or daily.
Tip: More frequent compounding (monthly vs. annually) grows your money faster.
Result: You'll see your future value, total interest earned, and how compounding frequency affects growth.
How the Calculation Works
Compound interest formula accounts for principal, rate, time, and compounding frequency.
A = P(1 + r/n)^(nt)Variables:
- A= Future value
- P= Principal (initial amount)
- r= Annual interest rate
- n= Compounding frequency per year
- t= Time in years
Practical Examples
Example: $10,000 Investment
$10,000 invested at 7% for 30 years, compounded monthly.
Inputs:
- Principal: $10,000
- Rate: 7%
- Years: 30
- Compounding: Monthly
Interpretation: After 30 years, you'd have approximately $81,000. You invested $10,000 but earned $71,000 in interest! This demonstrates the incredible power of compound interest over long periods.
When Should You Use This Calculator?
- •Understanding compound interest
- •Planning long-term savings
- •Comparing investment options
- •Motivating regular saving
Limitations and Things to Keep in Mind
Assumes constant interest rate
Returns vary for investments
Does not account for taxes
Inflation reduces purchasing power
Frequently Asked Questions (FAQs)
What's the difference between simple and compound interest?
Simple interest is calculated only on principal. Compound interest is calculated on principal plus accumulated interest, growing much faster over time.
How does compounding frequency affect growth?
More frequent compounding (daily vs. annually) grows your money faster. However, the difference becomes smaller as frequency increases (monthly vs. daily is minimal).
Why is time so important for compound interest?
Compound interest grows exponentially, meaning later years generate much more growth than early years. Starting 10 years earlier can double or triple your final amount.