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Compound Interest Calculator

Compound interest is the most powerful force in personal finance. It turns small, consistent investments into life-changing wealth by earning returns not only on your original money, but on all the interest that has already accumulated.

"Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it." — Attributed to Albert Einstein
Simple vs Compound Interest

Simple interest pays only on the original principal. $10,000 at 7% simple interest earns $700 every year, totaling $24,000 after 20 years. With compound interest, the same investment grows to $38,697 — that is $14,697 more, entirely from interest earning interest.

The Rule of 72

Divide 72 by your annual interest rate to estimate how many years your money takes to double. At 6%, it doubles in ~12 years. At 10%, just ~7.2 years. Over 30 years at 10%, your money doubles more than 4 times — turning $10,000 into over $174,000.

Calculate Your Growth

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years
Advanced: Tax & Inflation
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Capital gains tax rate
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Average annual inflation

Enter your details and press Calculate Growth to see results.

Frequently Asked Questions About Compound Interest

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which only earns returns on the original amount, compound interest lets your earnings generate their own earnings, creating exponential growth over time.

More frequent compounding produces slightly higher returns. Daily compounding earns the most, followed by monthly, quarterly, semi-annually, and annually. However, the difference between daily and monthly compounding is usually small. Most savings accounts compound daily, while many investment accounts compound monthly or quarterly.

The Rule of 72 is a quick mental math shortcut to estimate how long it takes for an investment to double. Divide 72 by the annual interest rate to get the approximate number of years. For example, at 8% interest, your money doubles in roughly 72 / 8 = 9 years.

Starting early makes an enormous difference due to exponential growth. Someone who invests $300/month starting at age 25 will have significantly more at retirement than someone who invests $600/month starting at age 35, even though the late starter contributes more total money. Time in the market is one of the most powerful factors in wealth building.

The S&P 500 has historically returned about 10% annually before inflation, or roughly 7% after inflation. A diversified portfolio of stocks and bonds might return 6-8% on average. For conservative savings accounts or CDs, expect 3-5%. Always plan for a range of outcomes rather than a single number.

Inflation erodes the purchasing power of your future money. If your investment grows at 8% but inflation is 3%, your real return is approximately 5%. This calculator lets you enter an inflation rate to see your investment's future value in today's dollars, giving you a more realistic picture of your wealth.

Generally, pay off high-interest debt first (above 7-8%), since the guaranteed return from eliminating that interest usually exceeds average investment returns. For low-interest debt like mortgages (3-5%), investing simultaneously often makes sense because long-term market returns typically exceed the debt cost.

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