Compound Interest Calculator
Compound interest is often called the most powerful force in personal finance, because interest earns interest on itself over time. Enter a starting amount, rate, and how often it compounds to see the snowball effect for yourself.
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How It Works
The compound interest formula is:
A = P × (1 + r/n)^(n×t)
Where P is your principal, r is the annual rate as a decimal, n is how many times per year interest compounds, and t is time in years. The more frequently interest compounds, the faster your balance grows — daily compounding will always edge out annual compounding at the same stated rate, though the difference shrinks the shorter the time period.
Worked Example
$5,000 invested at 7% annual interest, compounded monthly, grows to roughly $10,048 after 10 years — the original $5,000 plus about $5,048 in interest, meaning the balance slightly more than doubles. Leave it another 10 years at the same rate and it grows to around $20,210, because by then the interest itself has become a large enough base to generate substantial interest of its own. This is the "snowball" people mean when they talk about compounding: the growth in the second decade dwarfs the growth in the first, even though the rate never changed.