Compound Interest Calculator
Calculate how your investments grow over time with compound interest. Add monthly contributions to accelerate growth. See the power of compounding with different frequencies.
Future Value
$106,214
Total Principal
$70,000
Total Interest
$36,214
The Power of Compound Interest
Compound interest is often called the eighth wonder of the world. You earn interest on your principal, then on the accumulated interest. Over decades, this creates exponential growth. The longer your time horizon, the more dramatic the effect.
Einstein reportedly called compound interest "the most powerful force in the universe." Even small contributions grow significantly over time. Start early, be consistent, and let compounding work for you.
Frequently Asked Questions
What is compound interest?▾
Compound interest is interest earned on interest. You earn interest on your principal, then on the accumulated interest. Over time, this creates exponential growth. $10,000 at 7% grows to $19,671 in 10 years without additional contributions.
How does compounding frequency affect growth?▾
More frequent compounding = more growth. Daily compounding earns slightly more than annual. At 7% APY for 10 years: $10,000 becomes $19,671 (annual) vs $20,122 (daily). The difference increases with time and rate.
What is the rule of 72?▾
The Rule of 72 estimates doubling time: divide 72 by the interest rate. At 7% interest, money doubles in ~10.3 years (72 ÷ 7). At 10%, it doubles in ~7.2 years. This quick calculation shows compound growth power.
Should I make monthly contributions?▾
Yes! Regular contributions dramatically accelerate growth. Adding $500/month to $10,000 principal at 7% yields $117,723 after 10 years vs just $19,671 without contributions. Consistency beats timing.
What return rate should I expect?▾
Stocks historically return 7-10% annually (before inflation). Bonds return 2-5%. High-yield savings offer 4-5%. Use conservative estimates (4-6%) for planning. Past performance doesn't guarantee future results.
How does inflation affect returns?▾
Inflation erodes purchasing power. If investments return 7% but inflation is 3%, real return is 4%. Adjust expectations accordingly. This calculator shows nominal returns; subtract inflation for real purchasing power.
What is the difference between APR and APY?▾
APR (Annual Percentage Rate) is the simple interest rate. APY (Annual Percentage Yield) includes compounding. 7% APR compounded daily = 7.25% APY. Banks advertise APY for savings, APR for loans.