Compound Interest Calculator

Calculate investment growth with contributions, inflation, and tax adjustments

Calculate Compound Interest

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years
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Shows future value in today's purchasing power
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Tax-advantaged accounts (401k, IRA) may defer taxes

Future Value

$0.00

$0.00
Total Contributions
$0.00
Interest Earned
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Effective Annual Rate
Rule of 72: At 7% interest, your money doubles in approximately 10.3 years
Growth Over Time
Year-by-Year Breakdown
Year Starting Balance Contributions Interest Ending Balance

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How to Calculate Compound Interest

Compound interest is one of the most powerful concepts in finance. Albert Einstein allegedly called it "the eighth wonder of the world." Unlike simple interest, compound interest earns interest on your interest, creating exponential growth over time.

The Compound Interest Formula

A = P(1 + r/n)nt
Where: A = Final amount, P = Principal, r = Annual rate, n = Compounds per year, t = Years

Compound Interest with Regular Contributions

When you make regular contributions, the formula becomes more complex. This calculator uses the future value of annuity formula combined with compound interest:

FV = P(1 + r/n)nt + PMT × [((1 + r/n)nt - 1) / (r/n)]

Daily vs Monthly vs Yearly Compounding

More frequent compounding leads to higher returns, but the difference diminishes:

Compounding $10,000 at 7% for 10 years Difference from Annual
Annually$19,671.51—
Quarterly$19,897.89+$226.38
Monthly$19,838.82+$167.31
Daily$20,137.53+$466.02

Simple Interest vs Compound Interest

The difference becomes dramatic over time:

Years Simple Interest Compound Interest Difference
10 years$17,000$19,672+$2,672
20 years$24,000$38,697+$14,697
30 years$31,000$76,123+$45,123

*$10,000 principal at 7% annual interest

Pro Tip: Start early! A 25-year-old investing $500/month at 7% will have $1.2M by 65. Starting at 35 yields only $567K—half as much despite only 10 fewer years.

Frequently Asked Questions

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (calculated only on principal), compound interest grows exponentially. The formula is A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding frequency, and t is time in years.

With monthly contributions, the formula combines compound interest with the future value of an annuity: FV = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]. P is initial investment, PMT is the monthly contribution, r is annual interest rate, n is compounding frequency (12 for monthly), and t is years.

Simple interest is calculated only on the original principal: I = P × r × t. Compound interest includes interest on previously earned interest, leading to exponential growth. Over 30 years at 7%, $10,000 grows to $31,000 with simple interest but $76,123 with compound interest—a difference of $45,000.

More frequent compounding yields higher returns. Daily compounding earns slightly more than monthly, which earns more than yearly. However, the difference is often small: $10,000 at 7% for 10 years yields $19,672 (yearly), $19,838 (monthly), or $19,863 (daily). Most savings accounts compound daily or monthly.

The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by the annual interest rate: at 6% interest, money doubles in approximately 72/6 = 12 years. At 8%, it doubles in about 9 years. This rule assumes compound interest and works best for rates between 6-10%.

Inflation reduces the real purchasing power of your returns. If you earn 7% but inflation is 3%, your real return is approximately 4%. This calculator's inflation adjustment shows your future value in today's dollars, giving a more accurate picture of actual purchasing power growth.

Interest earnings are typically taxed as ordinary income. If you're in the 22% tax bracket and earn $1,000 in interest, you owe $220 in taxes. Tax-advantaged accounts like 401(k)s and IRAs defer or eliminate these taxes, significantly boosting long-term growth. Our calculator can factor in your tax rate.

The future value with regular deposits combines two formulas: FV = P(1 + r/n)^(nt) for the initial lump sum, plus PMT × [((1 + r/n)^(nt) - 1) / (r/n)] for the annuity (regular deposits). If deposits are made at the start of each period, multiply the annuity portion by (1 + r/n).
Related Tool: CAGR Calculator

Calculate the compound annual growth rate of your investments.

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Disclaimer: This calculator is for educational and informational purposes only. It does not constitute financial advice. Calculations are based on constant rates and may not reflect actual investment performance, which can vary due to market conditions, fees, and other factors. Past performance does not guarantee future results. Always consult a qualified financial advisor before making investment decisions.

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Compound Interest Calculation Report

Generated by Share Predictions - sharepredictions.com

Disclaimer: This report is for educational and informational purposes only and does not constitute financial advice.

Calculations are estimates based on constant rates and may not reflect actual investment performance. Past performance does not guarantee future results.

Always consult a qualified financial advisor before making investment decisions. Report generated on

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