Compound Interest Calculator
See what a single deposit becomes over time, how much of the result is interest earning interest, and why the compounding frequency matters less than most people expect.
What compounding actually means
Simple interest pays you on your original deposit. Compound interest pays you on your deposit and on the interest already added. Each period the base grows slightly, so the next period earns slightly more.
Over a year or two the difference is barely noticeable. Over decades it dominates the result, which is why this calculator shows the two side by side rather than only the compound figure.
Reading the results
The comparison table is the one to look at. On $10,000 at 5% for 20 years, simple interest returns $20,000 while monthly compounding returns about $27,100. That extra $7,100 was generated entirely by interest earning interest — you contributed nothing further.
The yearly table shows the shape of it. The interest column grows every year, slowly at first and then noticeably. The curve is not steady; it steepens.
Nominal rate against effective rate
A 12% rate compounded monthly does not return 12% a year. Each month adds 1%, and that 1% then earns too, so the effective annual rate is 12.68%.
EAR = (1 + r / n)n − 1
The effective rate is the honest basis for comparison. When two products advertise the same nominal rate at different compounding frequencies, the effective rate is what separates them.
Frequency matters less than you would think
At 12%, annual compounding gives 12.00%, monthly gives 12.68%, daily gives 12.7475%, and continuous compounding — the theoretical limit — gives 12.7497%.
The jump from annual to monthly is worth having. Everything beyond that is a rounding error. A product advertising daily compounding is offering you roughly seven hundredths of a percent over monthly. Time and rate move the needle; frequency barely does.
A worked example
$10,000 at 5%, compounded monthly, for 20 years. The effective annual rate is 5.116%, and the balance reaches about $27,126 — roughly $17,126 of interest on a $10,000 deposit, with no further contributions.
Change the term to 30 years and it passes $44,600. The extra decade adds more than the entire first two decades did, which is the clearest demonstration of why time is the variable that matters most.
What is left out
- Tax. Interest in a taxable account is generally taxable in the year earned, and tax paid is money no longer compounding.
- Inflation. These are nominal dollars. At 3% inflation, money loses roughly half its purchasing power over 24 years.
- Fees. An annual fee compounds against you exactly as returns compound for you.
- Rate changes. The rate is held constant. Real savings rates move.
- Contributions. This models a single deposit. To add regular contributions, use the investment calculator.
Frequently asked questions
What is the rule of 72?
A shortcut for how long money takes to double: divide 72 by the annual return. At 6%, doubling takes roughly twelve years.
It is an approximation, most accurate between about 6% and 10%. Use the calculator for a precise figure.
Is daily compounding worth seeking out?
Barely. At 12%, daily compounding beats monthly by about seven hundredths of a percentage point a year. Choose on rate, access, and safety instead — the frequency is a rounding difference.
What is the difference between APR and APY?
APY includes the effect of compounding; APR generally does not. For savings products, APY is the comparable figure, and it is what this calculator reports as the effective annual rate.
Does this account for tax on the interest?
No. In a taxable account, interest is generally taxable in the year it is earned, so the amount left to compound is lower than shown. In a tax-deferred or tax-free account, the untaxed figure is closer to reality.
Why does starting earlier matter so much?
Because the largest gains come in the final years, when the balance is biggest. Delaying does not just remove a year from the start — it removes the last and most productive year from the end.
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This calculator is provided for general educational and estimation purposes only. It does not constitute financial or investment advice, and no rate shown here is a prediction. Returns are not guaranteed, and figures exclude tax and inflation. Consider speaking to a qualified adviser before making investment decisions.