Compound Interest Calculator
Calculate how your investment grows with compound interest. See final amount, total interest earned, and a year-by-year growth breakdown.
About Compound Interest Calculator
Our Compound Interest Calculator helps you visualize how your investments grow over time through the power of compound interest. Unlike simple interest, which is calculated only on the principal, compound interest is calculated on both the principal and previously accumulated interest — meaning your money earns interest on interest.
This calculator supports different compounding frequencies (daily, monthly, quarterly, and annually) and allows you to include regular monthly contributions to see how consistent investing accelerates growth. The year-by-year breakdown table shows exactly how your balance grows each year and how much interest you earn versus what you contribute.
Compound interest is often called the "eighth wonder of the world" because of its powerful effect over long time periods. Even small differences in interest rates or compounding frequency can lead to significantly different outcomes over decades. Use this calculator to plan your savings goals, compare investment options, or understand the time value of money.
Frequently Asked Questions
Q What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal amount. If you invest $10,000 at 5% simple interest for 3 years, you earn $500 each year for a total of $1,500. Compound interest is calculated on the principal plus previously earned interest. The same $10,000 at 5% compound interest annually would earn $1,576.25 over 3 years because each year's interest earns interest in subsequent years.
Q How does compounding frequency affect returns?
More frequent compounding results in slightly higher returns because interest starts earning interest sooner. For example, $10,000 at 10% annual interest for 10 years yields $25,937.42 with annual compounding, $26,532.98 with monthly compounding, and $27,179.10 with daily compounding. The difference becomes more significant with higher interest rates and longer time periods.
Q What is the effective annual rate (EAR)?
The effective annual rate is the actual interest rate you earn in a year after accounting for compounding. For example, 12% annual interest compounded monthly gives an EAR of about 12.68%, because you earn 1% each month and the monthly interest compounds. EAR = (1 + r/n)^n - 1, where r is the nominal rate and n is the compounding frequency per year.