Compound Interest Calculator

What is compound interest?

Compound interest is interest that you earn on your original money and also on the interest it has already earned. Each period, your interest is added to your balance, and the next period's interest is calculated on that bigger amount. Over a long time, this snowball effect makes money grow faster and faster.

Simple interest is different, because it is calculated only on the original amount. If you put 10,000 into an account that pays 5 percent simple interest, you earn 500 every year, so after 10 years you have 15,000. With compound interest, the same deposit grows to about 16,289, which is almost 1,300 more, without you doing anything.

The compound interest formula

For a single deposit, the formula is A = P x (1 + r / n) ^ (n x t). A is the final amount, P is the starting deposit, r is the yearly interest rate written as a decimal, n is the number of times the interest is added each year, and t is the number of years.

For example, 10,000 at 5 percent, added once a year for 10 years, gives 10,000 x 1.05 ^ 10 = 16,288.95. When regular deposits are added every month, the calculator repeats the growth step month by month, so every deposit earns interest from the day it goes in.

How compounding frequency changes the result

The more often interest is added, the more you earn, but the gain is small. Take 10,000 at 5 percent for 10 years. Yearly compounding gives 16,288.95, and monthly compounding gives 16,470.09. Daily compounding gives only a little more, about 16,486.65.

The effective annual rate shows the real yearly growth after compounding. A 5 percent rate compounded monthly is really 5.12 percent a year, and the calculator shows this number for you. When you compare savings accounts, compare the effective annual rate, not only the headline rate.

The power of regular deposits

Regular saving is often more powerful than a large first deposit. If you save 200 a month at 6 percent, compounded monthly, for 20 years, your total deposits are 48,000. The balance at the end is about 92,408, which means more than 44,000 of it is interest.

Notice that the interest is almost as large as everything you put in, and the gap widens every year. The yearly table under the calculator shows exactly when your interest starts to grow faster than your deposits.

The rule of 72

The rule of 72 is a quick way to estimate how long it takes for money to double. Divide 72 by the yearly interest rate. At 6 percent, money doubles in about 12 years, and at 8 percent in about 9 years. At 3 percent it takes about 24 years.

The rule works well for rates between about 2 and 15 percent. The calculator shows this estimate in the results, so you can see the doubling time of your own rate at a glance.

Why starting early matters so much

Time is the most powerful part of compound interest. Imagine 5,000 invested at 7 percent a year. After 20 years it grows to about 19,348, and after 30 years to about 38,061. Those extra 10 years almost double the final amount, even though you did not add a single penny.

This is why financial advisers say that the best time to start saving is as early as possible, even with small amounts. Waiting for the perfect moment, or for a bigger income, costs more than most people expect.

Compound interest also works against you

The same snowball effect makes debt expensive. A credit card that charges interest on unpaid interest can grow fast, and paying only the minimum keeps you in debt for years. If you have a loan, our Loan Calculator shows the total interest you will pay, so you can compare it with what you could earn by saving.

What this calculator does not include

The result is an estimate based on a fixed interest rate and steady deposits. Real investments go up and down, savings rates change, and nothing here is guaranteed. Taxes, account fees and inflation are not taken into account either, so the real value of your money in the future will be lower than the amount shown. Use the calculator to plan and compare, and speak to a qualified adviser for personal advice.

Tips to grow your savings faster

• Start now: Time matters more than the size of the first deposit.
• Deposit regularly: A fixed monthly amount, even a small one, beats irregular large deposits.
• Compare the effective rate: Choose the account with the higher effective annual rate and low fees.
• Leave the interest in: Withdrawing interest stops the snowball.
• Increase deposits with your income: Raise your monthly amount whenever your pay goes up.
• Pay off expensive debt first: A high-interest loan usually costs more than your savings earn.

Why use our free compound interest calculator?

• Complete picture: Future value, total deposits, interest earned, effective annual rate and doubling time.
• Flexible: Yearly, semi-annual, quarterly, monthly or daily compounding, and deposits at the start or end of the month.
• Year-by-year table: See how your balance grows every year.
• Any currency: Pick a symbol or use none.
• Private and free: Nothing is uploaded, and there is no signup or limit.