Compound Interest Calculator

Compound interest is interest earned on interest, not just on the original deposit — which is why growth accelerates over time rather than staying linear. This shows a year-by-year breakdown of balance, deposits and interest earned so the effect is visible rather than abstract.

Why compounding frequency matters

The headline rate isn't the whole story — how often it's applied changes the outcome. At 10% annual interest on $1,000 left for a year, yearly compounding gives exactly $100. Monthly compounding, at the same 10% annual rate split across twelve smaller applications, gives about $104.71, because each month's interest starts earning its own interest sooner. The gap widens with time and with higher rates, which is why savings accounts and credit cards advertise APY (which already accounts for compounding frequency) rather than just a bare rate.

Regular contributions compound too

Adding a fixed monthly contribution changes the growth curve substantially, because every deposit starts compounding from the day it's added rather than waiting until the end. Someone contributing $200 a month for 20 years at 7% ends up with meaningfully more than someone who deposits the equivalent lump sum today and adds nothing further, purely because of how much longer the early contributions have had to compound.

The rule of 72

A quick sanity check without a calculator: divide 72 by the annual interest rate to estimate how many years it takes an amount to double. At 6%, that's 12 years; at 9%, 8 years. It's an approximation, but it's close enough to catch an obviously wrong input before trusting the detailed numbers.