Compound Interest Calculator
Use this free Compound Interest Calculator to calculate your Projected investment growth instantly and accurately.
Your plan
Projected balance
What is a Compound Interest Calculator?
A Compound Interest Calculator shows how your money grows when interest earns interest. Enter your starting principal, monthly contributions, interest rate, compounding frequency, and time horizon to see the exponential effect of compounding on your savings.
How to calculate compound interest manually (the formula)
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 compounding periods per year, and t is the number of years. With regular monthly contributions, use: FV = A + C × [ (1 + r/n)nt – 1 ] / (r/n) where C is the monthly contribution.
Example calculation
Invest $10,000 with $300 added monthly at 7% compounded monthly for 20 years: the formula gives a future value of approximately $197,000. Your contributions total $82,000, and the remaining $115,000 comes from compound interest.
Common mistakes
- Underestimating the power of time — Compound interest needs time to work. A 20-year old investing $200/month may end up wealthier than a 40-year old investing $1,000/month due to extra compounding years.
- Choosing the wrong compounding frequency — Daily compounding yields slightly more than monthly or annual compounding. The difference grows with larger amounts and longer time frames.
- Ignoring the impact of withdrawals — Taking money out breaks the compounding cycle and significantly reduces your final balance. Let your investments compound uninterrupted.
- Forgetting about inflation — A 7% nominal return may only be 4–5% in real terms after inflation. Plan using realistic after-inflation rates.
- Confusing compound interest with simple interest — Simple interest only applies to the principal. Always check whether a product uses simple or compound interest — the difference can be enormous.
Frequently asked questions
How does compound interest work?
Compound interest means you earn interest on both your original principal and on the interest that has already been added. Over time this creates exponential growth, which is why starting early makes such a big difference.
What is the formula for compound 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, n is the number of times interest compounds per year, and t is the number of years.
How does compounding frequency affect growth?
More frequent compounding (daily vs monthly vs annually) results in slightly more growth because interest is calculated and added more often. Over long periods, the difference can be meaningful.
What is the difference between compound and simple interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus all previously earned interest, leading to faster growth over time.
Is this calculator free to use?
Yes, completely free with no sign-up or download required. You can use it as many times as you like.