Compound Interest Calculator
Calculate how your savings or investments grow over time with the power of compound interest. Enter your starting amount, monthly contributions, interest rate, and time horizon to see your projected wealth.
Your Investment Projection
How Does Compound Interest Work?
Compound interest is the interest you earn on both your original investment and the accumulated interest from previous periods. Albert Einstein reportedly called compound interest the "eighth wonder of the world." When you reinvest your earnings, your money grows exponentially over time rather than linearly.
The compound interest formula:
A = P × (1 + r/n)n×t
Where A = final amount, P = principal, r = annual interest rate, n = compounding periods per year, t = time in years.
Why Starting Early Matters
Time is the most powerful factor in compound interest. If you invest $500 monthly at 7% annual return:
- After 10 years: ~$86,500
- After 20 years: ~$260,000
- After 30 years: ~$610,000
- After 40 years: ~$1,310,000
Notice how growth accelerates — the last 10 years generate more than the first 20 years combined. Start investing as early as possible.
Compound Interest FAQ
Simple interest is calculated only on principal. Compound interest is calculated on principal plus all accumulated interest. At 7% on $10,000, simple earns $700/year flat; compound earns $700 then $749 then $801, etc.
More frequent compounding yields higher returns. Daily compounding produces the highest, followed by monthly, quarterly, annual. The difference grows over longer periods with larger amounts.
The S&P 500 has historically returned ~10% before inflation (7% after). Savings accounts yield 3-5%. For retirement planning, 6-7% is a realistic long-term assumption for diversified stock portfolios.