Compound Interest Calculator

You earn interest, that interest is added to your balance, and then you earn interest on the bigger balance. It's like a snowball rolling downhill. Put $1,000 in an account paying 5% a year, and you earn $50 in the first year. In the second year, you earn 5% of $1,050, which is $52.50, and it keeps growing from there.

Use the calculator above with your amount, rate, frequency and time. As a guide, $10,000 at 5% compounded monthly earns about $6,470 in 10 years. At 7%, it earns $10,097. Interest is often taxable each year in a regular savings account, so what you keep could be somewhat less.

A = P x (1 + r / m) ^ (m x t). A is the final amount, P is the starting amount, r is the yearly rate as a decimal, m is the number of times it compounds per year and t is the number of years. The interest itself is A - P. In Excel, the same result comes from =P*(1+r/m)^(m*t) or the FV function.

Simple interest is calculated only on your original amount, so it stays the same every period. Compound interest is calculated on your original amount plus past interest, so it grows. On $2,000 at 3% for 3 years, simple interest is $180. Compound interest with yearly compounding is $185.45. The gap looks small at first and widens dramatically over decades.

Stocks don't pay interest, but their returns can compound. When a stock rises, your next gain or loss applies to the larger value. When you reinvest dividends, they buy more shares that can pay more dividends. Unlike a savings account, the return isn't fixed and can be negative in any year. Our stock calculator shows real history with dividends reinvested.

Investments in these accounts grow without yearly tax on dividends and gains, so the whole balance keeps compounding. In a Roth IRA, qualified withdrawals are generally tax free. In a traditional 401(k), you pay income tax when you withdraw. Regular contributions add to the effect. See it with your numbers in the Roth IRA and 401(k) calculators.

On a credit card, unpaid interest is typically added to your balance, then charged interest itself, usually daily. Most fixed-rate installment loans work a bit differently: each payment first covers that month's interest on the balance, so the interest doesn't build on itself as long as you pay on time. Paying more than the minimum stops credit card compounding fastest.

It depends on what you're comparing. For a safe account, a good rate is one that beats inflation and is competitive with other insured accounts. Long-term stock returns are higher but not guaranteed. Be cautious of anyone promising high and steady compound returns with no risk. Compare accounts using APY, which already includes compounding, on our APY calculator.

Daily compounding pays slightly more when you're saving and costs slightly more when you're borrowing. The difference is usually small, as the table above shows: at 7% over 20 years, moving from monthly to daily adds about $159 on $10,000. A higher rate or longer time matters far more, so don't choose an account on its compounding schedule alone.

It's a shortcut for estimating how long money takes to double. Divide 72 by the yearly rate. At 6%, it takes about 12 years, and at 9%, about 8 years. It's most accurate for rates between about 5% and 10%. It also works in reverse for inflation: at 3% inflation, prices double in about 24 years.

Compounding starts slowly, and the effect becomes striking after a decade or two. At 7%, $10,000 takes about 10 years to double. It doubles again by about year 20, and again by about year 30. That's why an extra five or ten years at the start can matter more than a larger deposit later.