Compound Interest Calculator
Calculate how your investments can grow over time with compound interest
Results
How Compound Interest Works
Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It’s often called “interest on interest” and can cause wealth to grow exponentially over time.
Where:
- A = the future value of the investment/loan, including interest
- P = the principal investment amount (the initial deposit or loan amount)
- r = the annual interest rate (decimal)
- t = the number of years the money is invested or borrowed for
- n = the number of times that interest is compounded per year
Compound Interest Calculator
If you want to see how your money can grow faster with compounding, our Compound Interest Calculator makes it simple. Unlike simple interest, which only pays on the original amount, compound interest lets you earn interest on both your principal and previously earned interest. Over time, this snowball effect can turn modest savings into significant wealth.
What is a Compound Interest Calculator?
A Compound Interest Calculator is a financial tool that helps you estimate how much your money will grow when interest is compounded. It considers:
- Principal (P): Your starting amount.
- Interest Rate (r): Annual rate in percent or decimal form.
- Time (t): Number of years your money grows.
- Compounding Frequency (n): How often interest is added (annual, quarterly, monthly, daily, or continuously).
The calculator applies the compound interest formula to show your final balance (A) and the interest earned (I).
The Compound Interest Formula
The standard formula is:
A = P(1 + r/n)^(nt)
Where:
- A = Final amount (principal + interest)
- P = Principal amount
- r = Annual interest rate (decimal, so 5% = 0.05)
- n = Compounding frequency per year
- t = Time in years
Interest Earned (I): I = A – P
Types of Compounding
The frequency of compounding has a huge impact on growth.
| Compounding Type | Formula | Example |
|---|---|---|
| Annual | A = P(1 + r)^t | Interest added once a year |
| Quarterly | A = P(1 + r/4)^(4t) | Interest added 4 times per year |
| Monthly | A = P(1 + r/12)^(12t) | Interest added 12 times per year |
| Daily | A = P(1 + r/365)^(365t) | Interest added 365 times per year |
| Continuous | A = Pe^(rt) | Interest compounded infinitely often |
Example: Using a Compound Interest Calculator
Let’s say you invest $10,000 at 5% annual interest, compounded monthly, for 10 years.
Formula:
A = 10,000(1 + 0.05/12)^(12×10)
A = 10,000(1.0041667)^120
A ≈ $16,470
Result:
- Final Balance: $16,470
- Interest Earned: $6,470
Compared to simple interest ($5,000 over 10 years), compounding earned you an extra $1,470.
After seeing how your money compounds, discover how other interest calculations compare:
- Use the Periodic Compound Interest Calculator to adjust for different compounding frequencies.
- Find equivalent annual growth using the Effective Annual Rate Calculator.
- Compare with non-compounding cases using the Simple Interest Calculator.
- Estimate borrowing costs precisely with the APR Calculator.
Real-Life Applications of a Compound Interest Calculator
1. Savings Accounts & CDs
Banks often use daily or monthly compounding. A calculator shows how much faster daily compounding grows compared to annual.
2. Investments & 401(k)s
For long-term retirement savings, compounding over decades creates exponential growth.
3. Loans & Credit Cards
Compound interest also works against you. Credit cards charge interest on unpaid balances plus accrued interest, making debts grow quickly.
Continuous Compounding Formula
With continuous compounding, interest is added an infinite number of times per year. The formula is:
A = Pe^(rt)
Example:
$1,000 invested at 6% for 5 years:
A = 1,000e^(0.06 × 5) ≈ $1,349.86
This is slightly higher than daily compounding because the interest grows without limit.
Compound Interest Calculator vs. Simple Interest Calculator
| Feature | Simple Interest | Compound Interest |
|---|---|---|
| Formula | I = P × r × t | A = P(1 + r/n)^(nt) |
| Growth | Linear | Exponential |
| Example (10 years @ 5% on $10,000) | $5,000 interest | $6,470 interest |
| Use Cases | Auto loans, bonds | Savings accounts, credit cards, investments |
Takeaway: Compounding builds wealth faster, but it can also make debt grow faster if unpaid.
How to Use the Compound Interest Calculator
- Enter Principal (P): Your starting balance.
- Set Interest Rate (r): Annual rate as percent or decimal.
- Choose Compounding Frequency (n): Annual, quarterly, monthly, daily, or continuous.
- Enter Time (t): Duration in years (convert months into years by dividing by 12).
- Calculate: The tool will return your final balance and interest earned.
Example: Find the Interest Rate from Growth
Say your $30,000 investment grows to $33,000 in 2.5 years, compounded daily. What’s the rate?
Formula:
r = n[(A/P)^(1/(nt)) – 1]
r = 365[(33,000/30,000)^(1/(365×2.5)) – 1]
r ≈ 0.03813 (3.813%)
Result: The investment yields 3.813% annually with daily compounding.
Compound Interest Calculator in Excel
You can also use spreadsheets like Excel or Google Sheets.
Future Value Formula:
=ROUND(P * (1 + (r/n))^(n*t),2)
Example:
- Principal = 10,000
- Rate = 3%
- Compounding = Quarterly (4)
- Time = 5 years
Result: $11,611.84
Why Compound Interest Matters
- Wealth Building: The earlier you start saving, the more compounding works in your favor.
- Debt Growth: Credit card balances can spiral because of compounding.
- Financial Planning: A compound interest calculator helps you compare scenarios and choose wisely.
The Compound Interest Calculator is more than a math tool—it’s a window into how money grows or debt accumulates. By adjusting inputs like time, rate, and frequency, you can see how small changes dramatically affect outcomes.
For savers and investors, compounding is your best ally. For borrowers, it’s a force to manage carefully. Either way, understanding and using a compound interest calculator gives you a clear financial advantage.
Further Reading
Tree of Math: Continuous Compounding
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