EachCalculatorCompound Interest Calculator
Calculate how much an investment or savings balance grows with compound interest, where each period's interest is earned on the principal plus all previously earned interest.
Interest Earned
$348.85
Total Amount
$1,348.85
How It Works
Why compounding grows faster than simple interest
With compound interest, interest is calculated on the running total (principal plus all interest earned so far), not just the original principal — so the amount of interest earned each period increases over time.
Compounding frequency matters
The more frequently interest compounds (daily vs. monthly vs. annually) at the same nominal annual rate, the faster the balance grows, since interest starts earning its own interest sooner.
Example Calculation
$1,000 at 6% compounded monthly for 5 years grows to about $1,349 — roughly $11 more than the same rate compounded just once a year.
Common Mistakes
- Assuming annual compounding when a rate is advertised without specifying frequency — many savings products compound monthly or daily.
- Forgetting that compound growth accelerates over time — the difference between compounding frequencies is small over 1 year but meaningful over 20+ years.
Frequently Asked Questions
- What's the compound interest formula?
- A = P × (1 + r/n)^(n×t), where P is principal, r is the annual rate, n is the number of times interest compounds per year, and t is the number of years.
- Does this calculator support simple interest too?
- This page is focused on compound interest specifically. For a side-by-side simple vs. compound comparison, see the Interest Calculator.