Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the interest that has already been earned. Unlike simple interest (which is calculated only on the principal), compound interest grows exponentially — the longer you invest, the faster your money grows because you earn interest on your interest.

The compound interest formula is: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of times interest compounds per year, and t is the time in years. For example, $10,000 at 7% compounded monthly for 20 years grows to approximately $40,388.

At 7% annual interest compounded monthly, $10,000 grows to approximately $40,388 after 20 years — a gain of $30,388 in interest. If you also add $200 per month, the total after 20 years would be approximately $144,000, of which $48,000 came from contributions and $86,000 from compound interest.

Yes, but the difference between monthly and daily compounding is small for typical interest rates. What matters much more is the annual interest rate and the time period. More frequent compounding (daily vs. annually) can add a small percentage to the final balance, but increasing your savings rate or finding a higher-return investment has a far greater impact.