Compound Interest Calculator

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It makes a sum of money grow faster than simple interest, which is calculated only on the principal amount. With compound interest, you earn returns on both your original investment and on the interest you've accumulated.

The more frequently interest is compounded, the higher the effective annual yield. For example, $1,000 at 10% compounded annually would be $1,100 after one year, but if compounded monthly, it would grow to approximately $1,104.71. Compounding daily or continuously yields even slightly higher returns.

The Rule of 72 is a simple way to estimate how long it will take for an investment to double at a fixed annual rate of return. You divide 72 by the annual interest rate to get the approximate number of years. For example, an investment with a 9% annual return would take about 8 years (72 ÷ 9 = 8) to double in value.

Regular contributions significantly accelerate the growth of your investment. Even small periodic deposits, when made consistently over time, can lead to substantial wealth accumulation thanks to compound interest. This is particularly powerful when starting early, allowing more time for compounding to work.

Inflation erodes the purchasing power of money over time. To calculate real returns, you should subtract the inflation rate from your nominal investment return. For example, if your investment grows at 7% annually but inflation is 3%, your real return is about 4%. Long-term financial planning should account for this effect.