Compound Interest Calculator

What compound interest is

With compound interest, the interest you have already earned is added to the balance and then earns interest of its own. Simple interest, by contrast, is calculated on the original amount only, so it adds the same sum every year. Under compounding the yearly gain keeps growing because the base it is calculated on keeps growing. The longer the time and the higher the rate, the wider the gap between the two methods becomes. This page is a calculator for illustrating that effect with numbers you choose. It is not financial advice, and it does not know what any real account or investment will pay.

The formula

Final amount = principal × (1 + annual rate ÷ compounding periods per year)^{periods per year × years}

With a 5% annual rate compounded monthly, each month adds 5% ÷ 12, about 0.4167%, and that repeats 120 times over ten years. When you enter a monthly deposit, the calculator steps through the months one at a time. It first converts your compounding choice into an equivalent monthly growth rate, (1 + annual rate ÷ periods)^{periods ÷ 12} − 1, then for each month computes “balance × (1 + monthly rate) + deposit.” Deposits are assumed to be made at the end of each month.

Simple interest is principal × rate × time, and each monthly deposit earns simple interest only for the months it stays in. The after-tax amount subtracts your tax percentage from the total interest in one step at the end, and the inflation-adjusted value divides the after-tax amount by (1 + inflation)^years. All three rates are numbers you supply; this page does not know actual tax rules or future prices.

Compounding frequency compared ($10,000 at 5% for 10 years)

Moving from simple interest to annual compounding adds $1,289 here, while moving from annual to daily compounding adds only $198. Slicing the compounding period finer helps very little compared with the rate and the number of years, which matter far more. Past a certain point, more frequent compounding approaches a ceiling.

How many times your money multiplies (annual compounding)

The table shows (1 + rate)^years, the factor by which any starting amount is multiplied. It is built with the same formula when the page is generated and applies to any amount, assuming no withdrawals.

The Rule of 72: estimating the doubling time

Dividing 72 by the annual rate in percent gives a rough number of years for money to double under compounding. It is mental-math shorthand, and it drifts when the rate is very low or very high. The exact doubling time is ln 2 ÷ ln(1 + rate).

Worked examples

Example 1. $10,000 at 5%, compounded monthly, for 10 years. $10,000 × (1 + 0.05 ÷ 12)¹²⁰ ≈ $16,470. The interest is about $6,470. With simple interest the same inputs end at $15,000, so compounding adds roughly $1,470.

Example 2. The effect of time and rate. $10,000 at 10% compounded annually for 30 years grows to about $174,494 (17.4 times), whereas simple interest would give $40,000 (4 times). The same amount at 5% for 30 years reaches about $43,219. A five-point difference in rate produces a final balance roughly 4.0 times larger.

Example 3. Monthly deposits. Depositing $500 every month at 5% compounded monthly for 10 years, starting from zero, means $60,000 contributed and a final balance of about $77,641, of which $17,641 is interest. If you assume a 20% tax on interest (an example figure only, not a real rate), the tax would be about $3,528 and the after-tax total $74,113.

Example 4. Inflation. Take the $16,470 from Example 1 and assume 2.5% annual inflation, which is again just an illustration. After ten years its purchasing power in today’s terms is about $12,866. The number on the statement grows more than the real value of what it can buy.

Common mistakes and misunderstandings

• “A shorter compounding period is a big win.” As the table shows, going from annual to daily is a small step compared with higher rates, longer periods and leaving the money untouched.
• Mixing up rate periods. The rate field is always per year. Entering a monthly rate there will give results that are wildly off.
• Gross versus net. Advertised rates are commonly quoted before tax and fees. Anything subject to tax or charges will leave you with less than the headline figure.
• Nominal versus real. A return below inflation grows the number but not your buying power.
• Assuming steady returns. Investments that rise and fall do not compound at a smooth average each year, and the order of good and bad years changes the outcome.

When not to use this calculator

• To forecast the value of stocks, funds or crypto, whose returns vary every year. This is a fixed-rate simulation and guarantees nothing.
• When you will withdraw money, the rate will change, or the product has bonus rates, penalties or fees. None of these are modelled.
• When you need an exact tax or fee figure. Rules differ by country, account type and time, so use rates you have checked yourself. The 20% in the examples is a placeholder.

How to use the results

• Work backward from a goal. If the final amount falls short, change one variable at a time (deposit, years or rate) and see which moves the result most. Extending the time often matters most.
• Read the yearly table. Early on, most of the balance is your own contributions; later, the yearly interest can exceed what you add. Reaching that stage is where compounding does its work.
• Compare with a regular savings plan using the Savings Installment Calculator.
• Check how debt compounds the other way with the Loan Calculator.
• Convert growth into percentages with the Percentage Calculator, which also shows why a 10% loss needs about an 11.1% gain to recover.

Important notes

This calculator is a reference simulation based on a fixed rate. It is not an offer, recommendation or promise of returns, and it is not financial, tax or legal advice. Real products can calculate interest differently (day counts, promotional rates, early-withdrawal rules) and tax rules vary, so read the provider’s terms and consult a qualified professional before deciding. Your inputs are calculated in your browser and are not sent to a server.

Frequently Asked Questions

Related tools

• Savings Installment Calculator: regular deposits into a savings plan
• Loan Calculator: repayment schedules and total interest
• Percentage Calculator: percent change and reverse percentages
• Past & Future Value of Money Calculator: inflation-adjusted purchasing power over time