Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, it causes your balance to grow exponentially over time — often described as 'interest on interest'. The more frequently it compounds, the faster your money grows.

The more often interest compounds, the higher your effective annual yield. For example, at 7% annual rate: annual compounding yields 7.00%, monthly yields ~7.23%, and daily yields ~7.25%. Over many years these differences add up meaningfully. Daily compounding is most commonly used in savings accounts and money market funds.

The Rule of 72 is a quick mental shortcut: divide 72 by the annual interest rate to estimate how many years it takes for an investment to double. At 7% it takes about 72 ÷ 7 ≈ 10.3 years to double. It's a useful approximation that works well for rates between 6% and 10%.

Yes — dramatically so. Even modest monthly contributions benefit from compound growth over a long horizon. For example, $10,000 at 7% for 30 years grows to about $76k. Adding just $200/month turns that into ~$308k. This is because every contribution immediately starts compounding, and earlier contributions compound for more periods.

It's a useful starting point for projecting growth under constant-rate assumptions. However, real-world investing involves variable returns, taxes, inflation, and fees that this tool doesn't model. For formal retirement planning, consult a licensed financial advisor who can account for your specific situation, tax-advantaged accounts (401k, IRA), and withdrawal strategy.