What Is Compound Interest?
Compound interest is interest earned on your original money and on the interest already added to it. Each time interest is added, the next round of interest is worked out on a larger balance, so growth speeds up over time. Simple interest, by contrast, is only ever paid on the original amount. The same effect works against you on debts such as credit cards, where unpaid interest also earns interest.
What makes it grow faster
- Time: the biggest factor. The longer the money stays invested, the more interest earns interest.
- Interest rate: a higher rate grows the balance much faster over long periods.
- Regular deposits: each deposit starts earning interest of its own.
- Compounding frequency: adding interest more often helps, but usually far less than the other three.
Which calculator should I use?
- This calculator: for savings and investments with a yearly rate, over months or years, with regular deposits or withdrawals.
- Compound Daily Interest calculator: for a daily rate, followed day by day, with the choice of reinvesting only part of the earnings.
- Investment Growth calculator: to compare one amount at two different rates.
How to Calculate Compound Interest
Without regular deposits, the balance after t years is:
When deposits arrive as often as interest compounds, add the growth of those deposits:
- FV: the future value, or ending balance.
- PV: the present value, or starting amount.
- r: the yearly interest rate, as a decimal.
- n: how many times a year interest compounds.
- t: the number of years.
- D: the regular deposit.
When deposits and compounding happen at different times, as in the example below, there is no single short formula. The calculator works through it month by month: interest builds up at the rate ÷ 12, deposits arrive at the end of their period, and the interest built up is added at each compounding date.
Example
$1,000 at 10% a year, compounded yearly for 5 years, plus $10 deposited each month:
- The $1,000 alone: $1,000 × 1.105 = $1,610.51
- The 60 deposits of $10 ($600) grow to $766.19
- Ending balance: $2,376.70, which is $1,600.00 of deposits and $776.70 of interest.
How to Use the Compound Interest Calculator
"I have $1,000 and can add $10 a month. At 10% a year, how much will I have in 5 years?" This calculator answers that.
Let's enter the numbers for this example in each box. They are already filled in when the calculator opens, so you can follow along and then change any box to match your own savings.
- Starting Amount: Enter 1,000, which is the money you start with. It can be 0 if you make regular deposits.
- Yearly Interest Rate: Enter 10, which is the yearly rate in percent. It must be from 0 to 100.
- Regular Deposit: Enter 10, which is added at the end of each period. Enter a negative amount, such as -100, for a regular withdrawal, or 0 for none.
- Term: Enter 5 years and 0 months, which is how long the money stays invested. It can be from 1 month to 100 years.
- Compound Frequency: Choose Yearly, which is how often interest is added to the balance. You can also choose Semi-Annually, Quarterly or Monthly.
- Deposit Frequency: Choose Monthly, which is how often the deposit is made. You can also choose Quarterly, Semi-Annually or Yearly.
Calculate and Reset
Click Calculate to see your results. If a box has a problem, such as a term longer than 100 years, a message pops up under that box instead. With the default numbers you get:
- Your Results: a short summary in words: the ending balance ($2,376.70), what you put in, and the interest earned. With withdrawals, it also tells you if the money runs out.
- Ending Balance: the headline number.
- Total Interest, Total Deposits, Effective Annual Rate and Interest Share of Balance: $776.70, $1,600.00, 10% and 32.68%.
- Deposits and interest by year: a stacked bar for each year. With withdrawals, it shows the balance instead.
- How often it compounds: the same money compounded yearly, semi-annually, quarterly, monthly and daily, with a link that opens the Compound Daily Interest calculator with your numbers filled in.
- Schedule: deposits, interest and balance by year, or by month on the Monthly tab. Download Excel saves every month with the formulas, so you can change a number at the top of the file and see the results update.
- Share Results: a link that opens this calculator with your numbers filled in. Copy it, or share it on Facebook or X.
Amounts of $1 million or more are shortened, for example $1.25M. Click Reset to put every box back to its default and show the default results again.