See how your investments grow over time with compound interest
A compound interest calculator shows how your investments grow exponentially when interest is earned on both your principal and previously accumulated interest. It is one of the most powerful tools for long-term wealth building and retirement planning.
Albert Einstein reportedly called compound interest the eighth wonder of the world. The key to harnessing its power is time: the earlier you start investing, the more dramatic the compounding effect becomes. Even small amounts invested consistently can grow into substantial sums over decades.
Use this calculator to see the difference between investing a lump sum versus making regular contributions. Experiment with different compounding frequencies and time horizons to understand how each factor contributes to your final balance and total interest earned.
The compound interest formula calculates the future value by applying the periodic interest rate to the balance at each compounding interval, including additional contributions made each period.
Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus all accumulated interest. Compound interest grows faster because you earn "interest on interest."
More frequent compounding yields higher returns. Daily compounding generates the most growth, though the difference between monthly and daily compounding is usually small for moderate balances.
The Rule of 72 is a simple way to estimate how long it takes for your money to double at a given interest rate. Divide 72 by your annual rate of return to get the approximate number of years. For example, at 8%, your money doubles in about 9 years.
Inflation erodes the purchasing power of your returns. If you earn 7% on your investments but inflation averages 3%, your real return is only about 4%. This is why it is important to invest for returns that outpace inflation over the long term.
Tax-advantaged accounts like IRAs, 401ks, and Roth accounts benefit tremendously from compounding because investment gains grow tax-deferred or tax-free, allowing the full power of compounding to work without annual tax drag.