Compound Interest Calculator

Compound interest is interest earned on interest. Each period's gain gets added to the balance, and the next period's growth is calculated on that larger number. Over short stretches the difference between compound and simple interest is small; over decades it becomes the majority of the final total.

This calculator is a general-purpose look at how that snowball builds: a lump sum, an optional regular contribution, a nominal annual rate, and a compounding frequency. It leaves out taxes and inflation on purpose, since those depend on the specific account you're using. Once the mechanic here makes sense, the calculators linked throughout this page apply it to the product you actually own.

How does this calculator work?

Enter an initial deposit, an optional monthly or annual contribution, the nominal annual interest rate, how often it compounds, and the number of years the money grows.

The calculator converts your chosen compounding frequency into an exact monthly growth rate, then simulates the balance month by month for the full term, adding each contribution either before or after that period's growth depending on the timing you choose.

The result splits the final balance into what you put in, principal plus contributions, versus what compounding actually earned, so you can see how much of the total came from growth rather than deposits.

What is compound interest?

Interest is what a bank, bond, or investment pays for the use of your money over time. With simple interest, that payment is always calculated on the original amount: a $1,000 deposit earning 6% simple interest pays exactly $60 every year, forever, because the calculation never looks at anything except the original $1,000.

Compound interest changes one thing: instead of ignoring past interest, it adds that interest to the balance and calculates the next period's interest on the new, larger total. The same $1,000 at 6% compounded annually earns $60 in year one, but $63.60 in year two, because year two's 6% is calculated on $1,060, not $1,000. This is why account disclosures separate a nominal or stated rate from an annual percentage yield: the nominal rate describes the rate before compounding, while the yield describes what the account actually pays once compounding is included.

The gap starts small and widens every year. After 10 years, $1,000 at 6% simple interest totals $1,600.00; at 6% compound interest it totals $1,790.85. After 30 years the gap is far larger: $2,800.00 simple versus $5,743.49 compound, more than double. Push the same idea further, $1,000 at 10% for 40 years, and simple interest reaches $5,000.00 while compound interest reaches $45,259.26, over nine times as much. Neither deposit changed; only time and the compounding mechanism did.

Simple vs. compound interest

Simple interest shows up most often in short-term, fixed-payment contexts like some personal loans, where interest is calculated once against the original balance and doesn't compound. Nearly every savings account, CD, bond, and retirement account instead compounds, which is why the distinction matters for anyone comparing products.

The clearest way to see the difference is a real account. Our APY calculator converts a stated interest rate into the annual percentage yield you actually earn once compounding is factored in, which is the number worth comparing across accounts, not the headline rate.

How compounding frequency affects returns

Compounding frequency is how often interest gets added to the balance: annually, monthly, daily, or continuously (the mathematical limit of compounding infinitely often). More frequent compounding raises the effective annual rate above the stated nominal rate, because interest starts earning its own interest sooner. On a 6% nominal rate, here is what each frequency actually yields over a year:

Annually

6.0000%

Semi-annually

6.0900%

Quarterly

6.1364%

Monthly

6.1678%

Daily

6.1831%

Continuously

6.1837%

The gap between annual and continuous compounding here is only 0.1837 percentage points. Compounding frequency matters, but the interest rate itself and how long the money grows matter far more. Two products worth comparing side by side: a certificate of deposit, where the bank fixes both the rate and the compounding schedule, and a fixed annuity, which compounds tax-deferred and typically compares against a taxable account's after-tax rate instead of its stated one.

Advertised rates aren't guaranteed to stay put, either. Savings account and CD rates move with the broader interest-rate environment, and some accounts only pay the advertised rate up to a balance tier, or waive it entirely if a minimum balance isn't maintained. Reading the actual rate schedule, not just the headline number, keeps this calculator's estimate close to what an account will really pay.

Why starting early matters

Because each year’s interest earns interest the following year, time in the market often outweighs the amount invested. Two savers make the point concretely: one contributes $5,000 a year from age 25 to 34, then stops and lets the balance sit untouched until 65. The other waits until 35 and contributes $5,000 a year every year until 65. Both earn 7%.

The early saver puts in $50,000 total and ends up with $789,191.51 at 65. The late saver puts in three times as much, $150,000, and ends up with $505,365.21, nearly $284,000 less than the person who contributed a third as much money.

The ten-year head start is worth more than twenty extra years of contributions, purely because that money had more time to compound. This is also the logic behind the Rule of 72, a quick mental-math shortcut for estimating how many years it takes an amount to double at a given rate: 72 divided by the rate. At 7%, that estimate is 72 ÷ 7 ≈ 10.3 years, close to the exact answer of 10.24 years. It is central to the Roth vs. Traditional IRA decision, where locking in decades of tax-free compounding early is often worth more than the up-front deduction of a Traditional account.

Where compound interest shows up

Compound interest works the same way in every account; what changes is whether it's working for you or against you. Savings accounts, CDs, bonds, and retirement accounts all compound in your favor, the balance grows and so does the pace of growth. Fixed annuities and municipal bonds add a tax dimension on top of the same underlying math, which is why they get their own calculators elsewhere on this site.

Debt compounds too, just against you. A $5,000 credit card balance at a typical 24% APR, left untouched with no payments, grows to $10,199.44 in three years and $16,405.15 in five, more than triple the original balance. That's the same mechanic driving the growth examples above, running in reverse. Our credit card payoff calculator shows how even minimum payments change that trajectory.

Worked example

Start with $1,000, add $100 every month, at a 6% annual rate compounded monthly, for 10 years, with contributions added at the end of each month.

Initial deposit

$1,000

Monthly contribution

$100

Rate / compounding

6% / monthly

Final balance (10 yrs)

$18,207.33

Total contributed

$13,000.00

Interest earned

$5,207.33

How the numbers work

Each month the balance grows by 6% ÷ 12 = 0.5%, then the $100 contribution is added on top. Because contributions land at the end of the month, that month's $100 hasn't earned any interest yet.

After 120 months, the $1,000 initial deposit plus $12,000 of contributions ($100 × 120) total $13,000 put in. The account actually holds $18,207.33, so compounding contributed $5,207.33 on its own, 28.60% of the final balance.

Switching the same inputs to beginning-of-month contributions raises the final balance further, since every deposit then earns a full month of interest instead of none. Timing has a smaller effect than the rate or the horizon, but it is not nothing over a decade.

Where this applies

Tax treatment changes the comparison. A taxable account’s effective return after tax is often lower than a tax-advantaged one’s stated rate, which is exactly what our tax-equivalent yield calculator is built to compare. It’s also why municipal bond yields can look low next to a corporate bond’s yield to maturity and still come out ahead after taxes for some investors.

Once you know how a single balance compounds, see how it plays out over a full career with our retirement calculator: the same compounding math, applied to your actual retirement timeline.

This calculator assumes a constant rate for the entire term, with no fees, and no taxes on the gains along the way. Real accounts rarely hold a rate steady for years or decades, and most non-retirement accounts owe tax on interest as it's earned or when it's withdrawn. Treat the result as what the math says under those assumptions, a useful baseline for comparing options, not a guarantee of what any specific account will pay.