Compound Interest Calculator
See how your money grows over time with the power of compounding
What Is Compound Interest?
Compound interest is interest calculated on both your initial principal and the accumulated interest from previous periods. Every period, your balance grows — and the next period's interest is calculated on that larger balance.
This creates exponential growth over time. The longer the period and the higher the rate, the more dramatic the effect. Even small monthly contributions can build into life-changing wealth over decades.
Rule of 72 — Doubling Time
Divide 72 by the annual interest rate to estimate how long it takes to double your money.
| Annual Rate | Rule of 72 Estimate | Actual Years |
|---|---|---|
| 3% | 24.0 years | 23.4 years |
| 4% | 18.0 years | 17.7 years |
| 5% | 14.4 years | 14.2 years |
| 6% | 12.0 years | 11.9 years |
| 7% | 10.3 years | 10.2 years |
| 8% | 9.0 years | 9.0 years |
| 10% | 7.2 years | 7.3 years |
| 12% | 6.0 years | 6.1 years |
Compounding Frequency Comparison
How much does frequency matter? $10,000 at 10% for 10 years:
| Frequency | Final Amount | Interest Earned | Effective Annual Rate |
|---|---|---|---|
| Annually | $25,937 | $15,937 | 10.000% |
| Semi-Annually | $26,533 | $16,533 | 10.250% |
| Quarterly | $26,851 | $16,851 | 10.381% |
| Monthly | $27,070 | $17,070 | 10.471% |
| Daily | $27,183 | $17,183 | 10.516% |
The difference between monthly and daily is minimal. Rate and time matter far more than frequency.
Realistic Interest Rate Reference
| Investment Type | Typical Rate | Risk Level |
|---|---|---|
| High-Yield Savings (HYSA) | 4.0 – 5.0% | Very Low |
| Certificates of Deposit (CD) | 4.5 – 5.5% | Very Low |
| Treasury Bonds (T-Bills) | 4.0 – 5.5% | Low |
| Corporate Bonds | 4.5 – 7.0% | Low – Medium |
| S&P 500 (historical avg) | ~10% nominal / ~7% real | Medium |
| Total Stock Market Index | ~9 – 10% | Medium |
| Real Estate (REITs) | 7 – 12% | Medium – High |
Frequently Asked Questions
What is the compound interest formula?
The formula is A = P(1 + r/n)^(nt) where P = principal, r = annual rate (decimal), n = compounds per year, t = time in years. With regular contributions, a month-by-month loop is used for accuracy.
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal: A = P × (1 + rt). Compound interest earns interest on previous interest. Over long periods the difference is huge — $10,000 at 7% for 30 years: simple = $31,000 vs compound = $76,123.
Does compound interest work against me on debt?
Yes. Credit cards (20–30% APR) and high-interest loans compound against you. A $5,000 credit card balance at 25% APR costs $1,374 in interest in just one year. Paying off high-interest debt is often the best "investment" you can make.
How often does the S&P 500 compound?
Stock market returns compound continuously as prices change daily. For calculator purposes, monthly or annual compounding gives a very accurate projection. The S&P 500 has averaged ~10% annually over the last century (about 7% after inflation).
Why does starting early matter so much?
At 7%, money doubles every 10.3 years. Starting at 25 gives you 3 more doublings than starting at 35. $10,000 invested at 25 becomes ~$200,000 by 65. The same $10,000 at 35 only becomes ~$100,000. Those 10 years cost you $100,000.