How compound interest calculator works
Compound interest is interest earned on both your initial principal and the interest that has already accumulated. It is the most powerful force in investing: the longer your money compounds, the faster it grows. This calculator uses the standard compound interest formula A = P(1 + r/n)^(nt), where P is principal, r is the annual rate, n is compounding frequency, and t is years.
You can also add regular contributions (monthly deposits) to see how consistent saving accelerates growth. The calculator computes the future value of your principal plus the future value of an annuity (your contributions), then shows the total balance, total amount you contributed, and total interest earned.
For example, if you invest 10,000 at 7% compounded monthly for 10 years while contributing 100 per month, your balance grows to about 37,405. The interest earned (15,405) exceeds your total contributions of 22,000 because of compounding. Try different rates and timeframes to see the dramatic effect of compounding over longer periods.
Frequently asked questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. This means your money grows faster over time because you earn interest on your interest, not just on your original deposit.
How is compound interest calculated?
The formula is A = P times (1 + r/n)^(nt), where P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years. The calculator applies this automatically.
How do regular contributions affect growth?
Regular contributions add to your principal each period, so they also compound. Even modest monthly deposits can dramatically increase your final balance because each contribution starts compounding immediately.
What compounding frequency should I use?
Monthly compounding (12 times per year) is common for savings accounts. Daily compounding (365) gives slightly more. The more frequently interest compounds, the more you earn. The calculator defaults to monthly.
