BCBetter Calculators

Compound Interest Calculator

See how your savings grow over time with the power of compounding interest.

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Enter your values and click Calculate

How It Works

The calculator applies two separate formulas and sums the results. The first covers the lump-sum principal: FV_principal = P × (1 + r/n)^(n×t). Here P is the initial investment, r is the annual rate as a decimal, n is the compounding frequency per year (12 for monthly, 365 for daily), and t is the number of years. For $10,000 at 7% compounded monthly for 20 years: r/n = 0.005833, exponent n×t = 240, giving FV_principal = 10,000 × (1.005833)^240 ≈ $40,064. The second formula calculates the future value of all monthly contributions as an ordinary annuity, always using the monthly rate (r/12) regardless of the selected compounding frequency: FV_contributions = PMT × [(1 + r/12)^(12t) − 1] ÷ (r/12). For $500/month at 7% over 20 years, this gives approximately $131,291. The final balance is the sum of both: $40,064 + $131,291 ≈ $171,355. Total contributions equal the initial principal plus all monthly deposits (PMT × total months). Interest earned is the final balance minus total contributions. The growth multiple divides final balance by total contributions to show how much each dollar deposited has grown — a number that rises sharply with longer time horizons and higher rates, illustrating why time in market consistently outperforms timing the market.

Examples

$10,000 with $500/month for 20 years at 7%
A classic long-term investment scenario showing the power of compounding.
Result: Final balance of ~$271,000 on just $130,000 in contributions.
$50,000 lump sum, no contributions, 30 years at 8%
The power of a single investment left to grow.
Result: Grows to ~$503,000 — over 10x the original investment.
$5,000 with $200/month for 10 years at 6%
A mid-range savings scenario showing the combined effect of a lump sum and steady monthly contributions.
Result: Final balance of approximately $41,873 on $29,000 in contributions — $12,873 in earned interest.

Frequently Asked Questions

How often should interest compound?
More frequent compounding produces more growth at the same stated annual rate. Daily compounding yields slightly more than monthly, which yields more than quarterly, which yields more than annually. The difference is modest at low rates — moving from annual to monthly compounding on a 5% rate adds only about 0.12 percentage points in effective annual yield — but the gap widens at higher rates and over longer periods. For practical purposes, most high-yield savings accounts and brokerage accounts already compound daily or monthly, so the compounding frequency is usually determined by the account type rather than chosen by the investor.
What is the Rule of 72?
The Rule of 72 is a mental math shortcut: divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 6%, your money doubles roughly every 12 years (72 ÷ 6 = 12); at 8%, every 9 years. The rule works because 72 is close to 100 × ln(2) ≈ 69.3, adjusted slightly upward to be easily divisible. It is an approximation — actual doubling time at 6% compounded monthly is about 11.58 years — but it is accurate enough for quick planning and useful for comparing the impact of different expected returns on a long-term portfolio.
How is compound interest different from simple interest?
Simple interest is calculated only on the original principal, so a $1,000 deposit earning 5% simple interest generates exactly $50 every year regardless of how long it has been invested. Compound interest is calculated on the principal plus all previously earned interest, so the base grows each period and interest charges accelerate over time. The difference is negligible over short periods but compounds dramatically: $1,000 at 5% simple interest grows to $2,500 over 30 years, while the same amount at 5% compounded annually grows to approximately $4,322. Most savings accounts, bonds, and investment vehicles use compound interest.

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