Compound Interest

About Compound Interest

A compound interest calculator shows how a principal grows when interest is added to the balance at regular intervals, so that each period you earn interest on your interest as well as on the original amount.

Compounding is the engine behind long-term wealth building — the more frequently interest is compounded and the longer the money stays invested, the faster it grows.

Formula

• A — Final amount
• P — Principal
• r — Annual interest rate (as a decimal)
• n — Compounding periods per year
• t — Time in years

How to use it

1. Enter the principal amount you are starting with.
2. Enter the annual interest rate.
3. Enter the time period in years.
4. Choose how often interest compounds to see the final amount and interest earned.

Good to know

• For the same rate, more frequent compounding (daily vs yearly) produces a slightly higher final amount.
• The difference between compound and simple interest widens dramatically over long periods.
• The 'Rule of 72' gives a quick estimate: dividing 72 by the annual rate approximates the years needed to double your money.

Frequently asked questions