What is compound interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (calculated only on principal), compound interest allows your money to grow exponentially over time, making it a powerful tool for wealth building.

How does compounding frequency affect my returns?

More frequent compounding (daily vs. annually) results in slightly higher returns because interest is calculated and added to the principal more often. However, the difference is typically small - about 0.1-0.2% annually. The most important factors are the interest rate and time invested.

What is the difference between compound interest and simple interest?

Simple interest is calculated only on the original principal amount. Compound interest is calculated on the principal plus any accumulated interest, resulting in exponential growth. Over time, compound interest produces significantly higher returns than simple interest.

How long does it take to double my money with compound interest?

Use the Rule of 72: divide 72 by your annual interest rate. For example, at 8% annual return, your money doubles in approximately 9 years (72 ÷ 8 = 9). At 10%, it takes about 7.2 years. This rule provides a quick estimate of doubling time.

Should I make contributions at the beginning or end of the period?

Contributing at the beginning of each period (annuity due) results in slightly higher returns because each contribution has more time to compound. However, the difference is usually small, and end-of-period contributions (ordinary annuity) are more common and easier to manage.

What is a realistic return rate for compound interest calculations?

Historical stock market returns average 10% annually, but conservative estimates use 7-8% to account for inflation and risk. Savings accounts offer 0.5-5%, CDs offer 4-5%, and bonds offer 3-6%. Use conservative estimates for financial planning to avoid overestimating future returns.

Compound Interest Calculator

Free, accurate compound interest calculator with instant results. Calculate payments, interest, and total costs in seconds.

Calculate Compound Interest

Initial Principal

$100.00$10,000.00$1,000,000.00

Annual Interest Rate

0%7%30%

Time Period (Years)

years

1 years10 years50 years

Monthly Contribution (Optional)

$0.00$0.00$10,000.00

Compounding Frequency

Compound Interest Results

Future Value

$20,096.61

Total Contributions

$10,000

Total Interest Earned

$10,097

Effective Annual Rate

7.2%

Investment Growth Over Time

How to Use This Calculator

Enter Principal

Input your starting investment amount.

Set Interest Rate

Enter expected annual return rate (APR).

Choose Time Period

Select investment duration in years.

Select Frequency

Choose how often interest compounds.

Add Contributions

Optional: Add regular monthly contributions.

View Growth

See total returns and year-by-year breakdown.

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Frequently Asked Questions

Disclaimer

This calculator is for educational and informational purposes only. The results are estimates based on the information you provide and should not be considered financial, legal, or tax advice. Actual loan terms, interest rates, and payments may vary based on lender requirements, credit history, and market conditions. Always consult with a qualified financial advisor, tax professional, or legal expert before making financial decisions. DoTheCalc is not responsible for any financial decisions made based on these calculations.

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How to Use This Calculator

Enter Principal

Input your starting investment amount.

Set Interest Rate

Enter expected annual return rate (APR).

Choose Time Period

Select investment duration in years.

Select Frequency

Choose how often interest compounds.

Add Contributions

Optional: Add regular monthly contributions.

View Growth

See total returns and year-by-year breakdown.

Frequently Asked Questions