Compound Interest Calculator
Want to see how your money grows? Enter principal, rate, and time and you will see the future value with compounding. Small differences in rate add up fast.
TL;DR
- Interest is added to your balance, then that new balance earns interest.
- Future Value Formula: A = P × (1 + r ÷ n)^(n × t)
- Example 1: Investing $10,000 at 6% compounded monthly for 10 years — Principal (P): $10,000, Rate (r): 0.06, Frequency (n): 12, Years (t): 10
How it works
Interest is added to your balance, then that new balance earns interest. The more often it compounds, the faster it grows.
The math
Multiply the principal by one plus rate divided by periods, raised to total periods.
A is the future value of the investment, P is the initial principal, r is the annual interest rate (decimal), n is the compounding frequency per year, and t is the time in years.
Examples
Example 1: Investing $10,000 at 6% compounded monthly for 10 years
- Principal (P): $10,000, Rate (r): 0.06, Frequency (n): 12, Years (t): 10
- Calculate rate factor: r ÷ n = 0.06 ÷ 12 = 0.005
- Calculate exponents: n × t = 12 × 10 = 120 months
- Apply growth: A = $10,000 × (1.005)^120 = $18,193.97
- Total Compound Interest earned: $8,193.97
When to use it
✦ Retirement Account Projections
Model long-term growth of 401(k) and IRA contributions over several decades.
✦ Savings Account and CD Yields
Compare certificates of deposit offering different interest rates and compounding frequencies.
✦ Assessing Credit Card Debt Cost
Understand how credit card interest compounds daily, rapidly increasing unpaid debt balances.
⚠ Common mistakes
- Confusing Simple and Compound Growth: Underestimating how compounding increases savings over long-term intervals.
- Underestimating Inflation: Forgetting that inflation reduces the purchasing power of your money over time.
FAQ (2)
What is the Rule of 72?
A rule of thumb to estimate when an investment will double. Divide 72 by your annual interest rate. (e.g. at 6%, doubling takes 12 years).
What compounding frequency is best?
The higher the compounding frequency (e.g. daily instead of annually), the faster your interest grows.
Sources & References
⚠ Financial Disclaimer
This tool provides estimates for informational purposes only and does not constitute financial, tax, or legal advice. Results may vary based on local regulations, rates, and individual circumstances. Always consult a qualified professional before making financial decisions.