Compound Interest Calculator

Mastering Compound Interest: The 8th Wonder of the World

"Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it." — often attributed to Albert Einstein.

Geometric Growth

Unlike simple interest, compounding grows exponentially. Your interest earns its own interest, creating a snowball effect. Calculate your investment returns with our ROI Calculator.

Yield Velocity

The frequency of compounding matters. Daily compounding results in higher yields than annual compounding for the same nominal rate.

Time Horizon

Time is the most critical ingredient. Doubling the time period doesn't just double your return—it can multiply it by 4x or more.

Simple vs. Compound Interest: A 20-Year Race

Let's compare a $10,000 investment at 7% annual return.
Simple Interest pays 7% on the principal only. Compound Interest pays 7% on the principal + accumulated interest.

Year	Simple Interest Value	Compound Interest Value	Difference
Year 5	$13,500	$14,025	+$525
Year 10	$17,000	$19,671	+$2,671
Year 20	$24,000	$38,696	+$14,696
Year 30	$31,000	$76,122	+$45,122

The Rule of 72

This is a mental shortcut to estimate how long it takes to double your money.

72 ÷ Interest Rate = Years to Double

Ex: 72 ÷ 8% = 9 Years

Pro Tip: The 'Back-End' Boom

In a 30-year investment, over 50% of your total wealth is typically generated in the final 10 years.

Lesson: Patience is your most profitable asset. Don't interrupt the compounding curve unnecessarily.

Frequently Asked Questions

What is the best compounding frequency?

Mathematically, Daily (or Continuous) compounding yields the highest return because your interest gets reinvested 365 times a year. However, for most long-term investors, the difference between Monthly and Daily compounding is minor compared to the difference between Annual and Monthly.

Does inflation affect compound interest?

Yes. While our calculator shows the "nominal" growth (pure dollar amount), inflation reduces the "purchasing power" of that money. To see your "real return," substract the inflation rate from your interest rate (e.g., 7% return - 3% inflation = ~4% real growth).

What is the difference between APY and APR?

APR (Annual Percentage Rate) is the simple interest rate used for borrowing. APY (Annual Percentage Yield) includes the effect of compounding, which is why APY is always higher than or equal to APR. Investment products usually advertise APY to look better.

Can I lose money with compound interest?

Compound interest itself is just a mathematical principle. However, if the underlying asset (like a stock or crypto) drops in value, your principal decreases. Compounding works in reverse too—losses can compound if you lose X% one year and Y% the next on a diminishing base.