Compound Interest Calculator
See how a lump-sum investment grows with compound interest. Choose yearly, half-yearly, quarterly, monthly or daily compounding and view year-by-year growth.
How compound interest works
With compound interest, the interest you earn is added back to the balance at every compounding date, so
subsequent interest is calculated on a bigger base. The maturity value of a lump sum is:
A = P × (1 + r/n)n×t
where P is the principal, r the annual rate as a decimal,
n the number of compounding periods per year (1 yearly, 2 half-yearly, 4 quarterly,
12 monthly, 365 daily) and t the term in years. Interest earned is simply A − P.
Worked example
Invest 10,000 at 8% per year, compounded monthly, for
10 years: r/n = 0.08 ÷ 12 = 0.006667 and n×t = 120 periods. So
A = 10,000 × (1.006667)120 ≈ 22,196 — you earn about 12,196 in interest,
more than doubling your money. With yearly compounding the same deposit would reach only ≈ 21,589,
which shows how frequency nudges the result upward.
Why the last years earn the most
Compounding is back-loaded. In the example above the balance grows by about 830 in year 1 but by about
1,700 in year 10 — the same 8% applied to a base that has more than doubled. The year-by-year table above
makes this visible: each row's gain is larger than the last. That is why starting early matters far more
than finding a slightly better rate later.
Tips
- Compare offers on the effective annual yield, not the nominal rate — a 7.9% rate compounded monthly beats 8% compounded yearly.
- Use the Rule of 72 for quick doubling estimates: 72 ÷ rate ≈ years to double.
- Interest earned is usually taxable each year; the after-tax compounding rate is what your money really grows at.
Frequently asked questions
What is the compound interest formula?
A = P (1 + r/n)nt, where P is the principal, r the annual rate as a decimal, n how many times interest compounds per year, and t the number of years. The interest earned is A − P. This calculator applies exactly that formula.
What does compounding frequency mean?
It is how often earned interest is added back to the balance so it starts earning interest itself: yearly (n = 1), half-yearly (2), quarterly (4), monthly (12) or daily (365). More frequent compounding gives a slightly higher maturity value at the same nominal rate.
How much difference does monthly vs yearly compounding make?
At 8% for 10 years, 10,000 grows to 21,589 with yearly compounding but 22,196 with monthly — about 2.8% more. The gap widens with higher rates and longer terms, but it is the rate and time that dominate, not the frequency.
What is the difference between simple and compound interest?
Simple interest is charged only on the original principal, so growth is linear. Compound interest is charged on principal plus accumulated interest, so growth accelerates over time — "interest on interest".
How long does it take money to double?
A quick estimate is the Rule of 72: divide 72 by the annual rate. At 8% money doubles in roughly 72 ÷ 8 = 9 years. You can verify this in the year-by-year table below the result.