Free Compound Interest Calculator
See exactly how your money grows over time. Enter your principal, interest rate, compounding frequency, and time period to get an instant breakdown.
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How does compound interest work?
Compound interest is one of the most powerful forces in personal finance. Unlike simple interest — which only applies to your original principal — compound interest applies to both your principal and any interest you've already earned. This means your balance grows faster and faster over time, a phenomenon often called "interest on interest."
The formula is A = P(1 + r/n)^(nt), where P is your starting amount, r is the annual rate, n is how many times per year interest compounds, and t is the number of years. Compound Wiz handles all the math instantly.
The frequency of compounding makes a real difference. Daily compounding earns slightly more than monthly, which earns more than annual — though the interest rate and length of time you invest are the biggest drivers of your final balance.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, compound interest causes your balance to grow exponentially — often called "interest on interest."
What is the compound interest formula?
A = P(1 + r/n)^(nt) — where A is the final amount, P is the principal, r is the annual interest rate as a decimal, n is the number of compounding periods per year, and t is the number of years.
How often should interest compound for the best returns?
The more frequently interest compounds, the more you earn. Daily compounding produces slightly more than monthly, which produces more than annually. However, the interest rate and time period have a much larger impact than compounding frequency.
What is the difference between compound and simple interest?
Simple interest applies only to the original principal. Compound interest applies to the principal plus any interest already earned. Over long periods, the difference is dramatic — compound interest grows significantly faster.
What is the Rule of 72?
The Rule of 72 is a quick mental shortcut to estimate how long it takes for an investment to double. Divide 72 by the annual interest rate — at 6% your money doubles in about 12 years, at 8% it doubles in about 9 years.