Compound Interest Calculator
Calculate how your savings or investment grows with compound interest. See future value, interest earned and a year-by-year breakdown.
Year-by-year growth
| Year | Balance | Contributed | Interest earned | Growth |
|---|---|---|---|---|
| Year 1 | $10,723 | $10,000 | $723 | +7% |
| Year 2 | $11,498 | $10,000 | $1,498 | +15% |
| Year 3 | $12,329 | $10,000 | $2,329 | +23% |
| Year 4 | $13,221 | $10,000 | $3,221 | +32% |
| Year 5 | $14,176 | $10,000 | $4,176 | +42% |
| Year 6 | $15,201 | $10,000 | $5,201 | +52% |
| Year 7 | $16,300 | $10,000 | $6,300 | +63% |
| Year 8 | $17,478 | $10,000 | $7,478 | +75% |
| Year 9 | $18,742 | $10,000 | $8,742 | +87% |
| Year 10 | $20,097 | $10,000 | $10,097 | +101% |
What is compound interest?
Interest is the cost of using borrowed money — or, from the saver's perspective, the reward for lending it. There are two types: simple interest and compound interest.
Simple interest is calculated only on the original principal. If you deposit $10,000 at 7% simple interest for 10 years, you earn $700 per year — always based on the original $10,000. Total interest: $7,000.
Compound interest is different. Each time interest is calculated, it is added to your balance — and the next calculation is based on that larger balance. You earn interest on your interest. Over time, this creates exponential rather than linear growth.
Using the same numbers — $10,000 at 7% compounded annually for 10 years — the result is not $17,000 but $19,672. The extra $2,672 comes purely from compounding.
The compound interest formula
The standard formula for compound interest is:
A = P × (1 + r/n)^(n × t)Where:
- A — the amount after the specified period (what you end up with)
- P — the principal (your starting amount)
- r — the annual interest rate expressed as a decimal (7% = 0.07)
- n — the number of times interest compounds per year (12 for monthly)
- t — the number of years
Worked example: $5,000 invested at 6% compounded monthly for 3 years:
A = 5,000 × (1 + 0.06/12)^(12 × 3)
A = 5,000 × (1.005)^36
A = 5,000 × 1.19668
A = $5,983The investor earned $983 in interest — without contributing another cent.
How compounding frequency affects growth
The more frequently interest is compounded, the faster your money grows — though the difference between monthly and daily is smaller than most people expect. Here is how $10,000 at 8% grows over 10 years at different frequencies:
| Frequency | Times/year | After 10 years | Extra vs annual |
|---|---|---|---|
| Annually | 1× | $21,589 | — |
| Quarterly | 4× | $21,911 | +$322 |
| Monthly | 12× | $22,097 | +$508 |
| Daily | 365× | $22,254 | +$665 |
Moving from annual to daily compounding adds only $665 over 10 years — less than 0.3%. The interest rate itself matters far more than frequency. A 1% higher rate would add thousands.
The Rule of 72
The Rule of 72 is a quick mental shortcut to estimate how long it takes for an investment to double. Simply divide 72 by the annual interest rate:
Years to double = 72 ÷ interest rateAt 6% per year: 72 ÷ 6 = 12 years to double. At 9%: 72 ÷ 9 = 8 years. At 12%: just 6 years. The rule works because of the mathematics of exponential growth and is accurate enough for planning purposes for rates between 6% and 15%.
The power of starting early
The most important variable in compound interest is time. Consider two investors:
The early investor contributed $100,000 less but ended up with $176,000 more. The 10-year head start, compounding for an additional decade, was worth more than 30 extra years of contributions.
Compound interest working against you
Compound interest is a double-edged sword. The same mechanism that builds wealth for savers destroys it for debtors. Credit cards typically charge 18–25% APR, compounded daily. A $5,000 balance left unpaid for 5 years grows to over $14,000 — nearly tripling — without a single new purchase.
Student loans can capitalise during deferment periods, meaning unpaid interest is added to the principal — and you then owe interest on the interest. Always pay at least the minimum to prevent this.
Payday loans, some store credit offers, and buy-now-pay-later products can carry effective rates of 100–400% APR. Even short-term exposure to these rates can create debt spirals that are very difficult to escape.
Practical tips to maximise compound growth
- Start immediately, even with a small amount. A decade of compounding is worth far more than waiting to accumulate a “proper” lump sum to invest.
- Automate contributions. Monthly automatic transfers remove the decision entirely and ensure consistency.
- Reinvest all returns. Never withdraw dividends or interest early — that kills compounding.
- Keep fees low. A 1% annual management fee on an investment growing at 8% reduces your 30-year balance by roughly 25%. Choose low-cost index funds where possible.
- Increase contributions over time. Directing even part of each annual raise toward savings has a dramatic compounding effect.
- Use tax-advantaged accounts. In accounts where gains are not taxed annually, the full return compounds — rather than a post-tax return.
Shows how an investment grows over time with compound interest — interest that earns interest on itself. This is the core math behind retirement savings, index fund investing and debt accumulation. Albert Einstein reportedly called compound interest "the eighth wonder of the world."
A = P × (1 + r/n)^(n×t) P = Principal · r = Annual rate · n = Compounding frequency · t = Years Your interest earns interest — that is the core mechanic of compounding. The longer the time horizon, the more dramatic the effect.