What is compound interest?

Compound interest is interest earned on both your initial principal and previously earned interest. Unlike simple interest, compound interest grows exponentially over time.

How often is interest compounded?

This calculator assumes monthly compounding, which is the most common for savings accounts and investments. Some accounts compound daily, quarterly, or annually.

What is the Rule of 72?

The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual interest rate. At 7%, it takes approximately 72/7 = 10.3 years to double.

How much does starting early matter for compound interest?

Starting early has a dramatic effect. Investing $200/month from age 25 to 65 at 7% yields roughly $525,000. Waiting until age 35 and investing the same amount yields only about $243,000 — less than half — due to missing a decade of compounding.

Free Compound Interest Calculator

Calculate how your money grows with compound interest. See the power of compounding over time with different rates and contribution amounts.

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Initial Investment

USD

Monthly Contribution

USD

Annual Interest Rate

Time Period

years

Future Value

$144,572.72

Total Contributions$58,000.00

Total Interest Earned$86,572.72

Total Contributions

Interest Earned

Future Value vs Monthly Contribution

View formula & how it works →

How Compound Interest Works

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods.

Formula

FV = P(1+r)^n + PMT * [(1+r)^n - 1] / r

Where:

FV = Future value

P = Initial investment (principal)

PMT = Monthly contribution

r = Monthly interest rate

n = Total number of months

Example Calculation

You invest $10,000 and add $200 per month at 7% annual return for 20 years.

01Monthly rate: 7% / 12 = 0.5833% (0.005833)
02Total months: 20 * 12 = 240
03Growth of initial investment: $10,000 * (1.005833)^240 = $40,387.39
04Growth of contributions: $200 * [(1.005833)^240 - 1] / 0.005833 = $104,185.06
05Future Value = $40,387.39 + $104,185.06 = $144,572.45
06Total contributions: $10,000 + ($200 * 240) = $58,000
07Total interest earned: $144,572.45 - $58,000 = $86,572.45

Example Calculations

How much will $10,000 grow in 10 years at 5%?

$16,470.09

1.Principal: $10,000
2.Rate: 5% compounded monthly (0.4167% per month)
3.Time: 10 years (120 months)
4.A = 10,000 × (1 + 0.05/12)¹²⁰ = $16,470.09

How much will $5,000 grow in 20 years at 7%?

$20,096.61

1.Principal: $5,000
2.Rate: 7% compounded monthly
3.Time: 20 years (240 months)
4.A = 5,000 × (1 + 0.07/12)²⁴⁰ = $20,096.61

How much will $1,000 grow in 30 years at 10%?

$19,837.40

1.Principal: $1,000
2.Rate: 10% compounded monthly
3.Time: 30 years (360 months)
4.A = 1,000 × (1 + 0.10/12)³⁶⁰ = $19,837.40

How much will $50,000 grow in 5 years at 4%?

$61,009.87

1.Principal: $50,000
2.Rate: 4% compounded monthly
3.Time: 5 years (60 months)
4.A = 50,000 × (1 + 0.04/12)⁶⁰ = $61,009.87

How long does it take to double your money at 6%?

About 11.9 years

1.Use the Rule of 72: 72 ÷ 6 = 12 years (approximation)
2.Exact calculation: ln(2) / ln(1 + 0.06/12) / 12 = 11.58 years
3.With monthly compounding, $10,000 becomes $20,000 in about 11.9 years

Frequently Asked Questions

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