Compound interest is interest earned on your interest. Each period, the interest is added to the balance, so the next period’s interest is calculated on a larger amount. Over long periods this snowball effect is what makes saving and investing early so powerful.
How to use the compound interest calculator
- Enter your starting balance and the annual interest rate.
- Set how many years you plan to save and how often interest compounds.
- Optionally add a regular deposit, such as a monthly contribution.
- Read the final balance, then check the year-by-year table and chart.
Formula
A = P × (1 + r/n)^(n·t)
A is the final balance, P the initial balance, r the annual rate as a decimal, n the number of compounding periods per year and t the number of years.
With continuous compounding the formula becomes A = P × e^(r·t). Regular deposits are added at the end of each deposit period and then compound along with the rest of the balance.
Worked example
$1,000 at 8% compounded monthly for 20 years: A = 1000 × (1 + 0.08/12)^(240) ≈ $4,926.80. You deposited $1,000, so $3,926.80 is interest.
The rule of 72
A quick way to estimate doubling time: divide 72 by the annual rate. At 8%, money doubles in roughly 72 ÷ 8 = 9 years.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount. Compound interest is also paid on interest already earned, so the balance grows faster over time.
Does compounding frequency matter much?
More frequent compounding gives a slightly higher return. At 8%, yearly compounding gives an effective 8% while monthly gives about 8.30%. The jump from daily to continuous is tiny.
Are the results guaranteed?
No. The calculator assumes a constant rate. Real investment returns vary, and taxes and fees reduce growth.
Last updated · Calculations checked by automated tests· Editorial policy