Compound Interest Calculator

Enter a starting principal, annual interest rate, number of years and how often interest compounds to see the future value, the total interest earned, and the effect of compounding.

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Enter the details and press Calculate growth.

The compound interest formula

Compound interest pays interest on your interest. The future value of a lump sum is given by the standard formula:

A = P × (1 + r÷n)n·t

Where A is the final amount, P is the principal, r is the annual rate (as a decimal), n is the number of compounding periods per year, and t is the number of years. The interest earned is simply A − P.

Worked example

$10,000 at 5% compounded monthly for 10 years:

Periods: n·t = 12 × 10 = 120 months.
Periodic rate: r ÷ n = 0.05 ÷ 12 = 0.0041667.
Future value: 10,000 × (1.0041667)120 ≈ $16,470.09.
Interest earned: ≈ $6,470.09.

Why compounding frequency matters

The more often interest compounds, the faster the balance grows, because each new interest payment starts earning interest sooner. The gap between annual and daily compounding is small at low rates but widens as rates and time grow. The effective annual rate (APY) captures this: APY = (1 + r/n)n − 1.

Tip: to also model regular monthly deposits rather than a single lump sum, use the Investment Calculator, which adds an annuity contribution on top of the principal.

Frequently asked questions

How does compound interest work?

Compound interest pays interest on both your original principal and the interest already added. Using A = P(1 + r/n)^(n·t), $10,000 at 5% compounded monthly grows to about $16,470 in 10 years.

What's the difference between simple and compound interest?

Simple interest is paid only on the original principal, so it grows in a straight line. Compound interest is paid on principal plus accumulated interest, so the balance grows faster and faster over time.

Does compounding frequency really matter?

Yes, but less than people expect. More frequent compounding (daily vs annual) raises the final amount slightly. The effective annual yield (APY) = (1 + r/n)^n − 1 shows the true rate after compounding.

What is APY?

Annual percentage yield is the effective rate once compounding is included. A 5% nominal rate compounded monthly has an APY of about 5.12% — that is the figure to compare savings accounts by.

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Mustafa Bilgic · Editor, Calcool
The compound-interest formula A = P(1 + r/n)^(n·t) is standard finance mathematics. For consumer guidance on saving and interest, see the Consumer Financial Protection Bureau (CFPB). All math runs in your browser; figures are estimates.

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