Compound Interest Calculator

How compound interest builds wealth

Compound interest pays you interest on your interest. Each period the rate is applied to your whole balance — the original principal plus every dollar of interest already earned — so the balance grows faster the longer you stay invested. Simple interest, by contrast, only ever pays on the original principal. The U.S. Securities and Exchange Commission describes this growth as “the power of compound interest” because the curve bends upward over time rather than rising in a straight line.

A = P(1 + r/n)^nt

Here P is the principal, r is the annual rate as a decimal, n is the number of times interest compounds per year and t is the number of years. The calculator above uses this formula for your starting balance and then adds a second piece for your monthly contributions, which compound as they are paid in. That contribution stream follows the future-value-of-an-annuity formula:

A_contrib = C × ((1 + i)^m − 1) ÷ i

where C is the monthly deposit, i is the monthly rate (r ÷ 12) and m is the number of months. Adding the two pieces gives the total future value.

A fully worked example: $10,000 plus $200 a month

Suppose you start with $10,000, earn 7% a year compounded monthly, add $200 every month and leave it for 10 years. The starting balance alone grows to about $20,097. The 120 monthly deposits — $24,000 of your own money — grow to about $34,617. Together that is a future value near $54,714, of which roughly $20,714 is interest you never deposited:

You put in $34,000 total and the account earned an extra $20,714 on top — more than 60% of your own deposits, purely from compounding. Enter your own figures above to see your number instantly.

Does compounding frequency matter?

The more often interest is added, the more often it starts earning its own interest, so daily compounding beats annual compounding at the same stated rate. The effect is real but modest. Take $10,000 at 5% for 10 years with no contributions, and compare frequencies:

Moving from annual to daily compounding adds only about $198 over a decade here — roughly 3% more interest. That is why time and rate matter far more than how often interest posts. Continuous compounding (A = P×e^rt, where e ≈ 2.718) is the mathematical ceiling, and daily compounding already sits almost exactly on it.

Simple interest vs. compound interest

The gap between simple and compound interest widens dramatically over long horizons. Put $10,000 at 6% for 30 years. Simple interest pays a flat $600 a year, so you end with $10,000 + (30 × $600) = $28,000. Compounded annually, the same deposit grows to about $57,435 — more than double the simple-interest result, with the extra $29,435 coming entirely from interest earning interest. The longer the time frame, the larger that wedge becomes.

The Rule of 72: how fast money doubles

A quick mental shortcut: divide 72 by your annual rate of return to estimate the years it takes your money to double. It is an approximation, but a close one for typical rates.

At an 8% return your money doubles roughly every nine years, so $10,000 becomes about $20,000 in nine years, $40,000 in eighteen and $80,000 in twenty-seven — the doubling itself accelerates the growth.

Why starting early beats a bigger rate

Time is the most powerful lever. Imagine two savers, both earning 7% compounded monthly. Saver A puts in $200 a month from age 25 to 35 — just ten years, $24,000 total — then stops and lets it ride to age 65. Saver B waits, then contributes $200 a month from 35 to 65 — thirty years, $72,000 total. At 65, Saver A has about $281,000 while Saver B has about $244,000. Saver A invested a third as much money and still ends ahead, purely because that early money compounded for an extra decade. Starting sooner usually beats both a higher rate and larger later deposits.

What rate should you assume in 2026?

Realistic rates depend on where you keep the money. As of June 2026 the FDIC national average savings rate is just 0.38% APY, while top high-yield savings accounts pay around 4.15% APY and the Federal Reserve’s national average 12-month CD sits near 1.65%. For long-term investing, the S&P 500 has historically returned roughly 10% a year nominally and about 7% after inflation over nearly a century — a sensible figure for retirement projections, though any single year varies widely and past performance never guarantees future results. To model specific accounts, try the 401(k) calculator, the IRA calculator or the dividend calculator, and see where you stand overall with the net worth calculator.

Figures are illustrative and for information only, not financial advice. Rates and returns change and are not guaranteed; verify current rates with your bank or a licensed advisor before making decisions. Rate benchmarks: FDIC National Rates and Rate Caps (June 2026), Federal Reserve / FRED national CD rate, and long-run S&P 500 return history. Concept and formula references: U.S. SEC Investor.gov.