Compound Interest Calculator

The Power of Compound Interest

Compound interest is often called the "eighth wonder of the world." Unlike simple interest, which only earns on the principal, compound interest earns on both the principal and the accumulated interest — creating exponential growth over time. The longer your money compounds, the more dramatic the effect.

Compounding Frequency Explained

The more frequently interest compounds, the more you earn. Daily compounding yields slightly more than monthly, which yields more than annual compounding. For a $10,000 deposit at 5% for 10 years: annually yields $16,289; monthly yields $16,470; daily yields $16,487. The difference seems small but grows substantially with larger principals and longer periods.

The Rule of 72

Divide 72 by your annual interest rate to estimate how many years it takes for your money to double. At 6% interest, your money doubles in approximately 12 years (72 ÷ 6). At 9%, it doubles in just 8 years. This mental shortcut is a powerful way to quickly compare investment options.

Starting Early is Everything

Investing $5,000 at age 25 at 7% annual interest grows to ~$74,000 by age 65. Waiting until 35 and investing the same $5,000 yields only ~$38,000. The 10-year head start more than doubles the outcome — this is the compounding effect in action.