Compound Interest Calculator
Total and interest amount
What Is Compound Interest?
Compound interest calculates interest on both the principal and the previously accumulated interest. It creates exponential growth over time — making it the foundation of long-term investing.
How to Calculate Compound Interest
Formula: Total = Principal × (1 + Rate÷100)^Periods | Interest = Total − Principal
Example: $10,000 at 7% annual for 10 years: Total = $10,000 × (1.07)^10 = $19,672 | Interest earned = $9,672
The Power of Compounding
- The Rule of 72: Years to double = 72 ÷ annual rate
- At 8% annual rate, money doubles in 9 years
- Starting early is more powerful than starting with more money
- Used in retirement accounts, index funds, and savings
FAQ
How often should interest compound for best returns?
More frequent compounding (daily vs annual) yields slightly more, but the difference is small. Focus on the rate rather than frequency.
What is the difference between APY and APR?
APR is the annual rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding and is always higher than APR.