Compound Interest Calculator
Calculate compound interest with different compounding frequencies. See total amount, interest earned, and growth over time.
What is Compound Interest Calculator?
A compound interest calculator shows how money grows over time when interest is earned not only on the original principal but also on previously accumulated interest. This 'interest on interest' effect is the fundamental principle behind investing, savings accounts, and long-term wealth building. Albert Einstein reportedly called compound interest the 'eighth wonder of the world.' This tool calculates your total returns, shows year-by-year growth breakdowns, and lets you compare different rates, time periods, and compounding frequencies to make informed financial decisions.
How It Works
The tool uses the compound interest formula: A = P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate, n is the compounding frequency (daily, monthly, quarterly, annually), and t is time in years. For investments with regular contributions, it adds periodic deposits using the future value of annuity formula. The calculator shows a year-by-year breakdown so you can see how growth accelerates over time — the longer your money compounds, the more dramatic the growth curve becomes. All calculations are instant and update as you adjust any parameter.
Examples
£10,000 at 6% for 1 year
Annually: £10,600.00 Quarterly: £10,613.64 Monthly: £10,616.78 Daily: £10,618.31
£10,000 at 6% for 12 years
£20,122 — the rule of 72 predicts doubling in 72 / 6 = 12 years
Common Use Cases
- •Planning retirement savings by seeing how monthly investments grow over 20-30 years
- •Comparing savings accounts with different interest rates and compounding frequencies
- •Understanding the long-term cost of debt by seeing how interest accumulates on loans
- •Setting realistic investment goals by calculating required monthly deposits for a target amount
- •Demonstrating the time value of money for financial education and planning discussions
- •Comparing investment scenarios — lump sum vs systematic investment over the same period
Frequently Asked Questions
What is compound interest?▼
Compound interest is interest calculated on both the principal and accumulated interest from previous periods.
What is the compound interest formula?▼
A = P(1 + r/n)^(nt), where P is the principal, r the annual rate as a decimal, n the number of compounding periods per year and t the number of years. The interest earned is A − P.
How much difference does compounding frequency make?▼
Less than most people expect. £10,000 at 6% for a year returns £600 compounded annually, £613.64 monthly and £618.31 continuously — a spread of under 0.2 percentage points. Frequency matters far less than the rate and the time invested.
What is the rule of 72?▼
Divide 72 by the annual percentage rate to estimate the years needed to double your money. At 6% that is 12 years, at 9% it is 8. It is accurate enough for mental arithmetic in the 5 to 12% range and drifts at the extremes.
What is the difference between APR and APY?▼
APR is the simple annual rate excluding the effect of compounding; APY, sometimes called the effective annual rate, includes it. A 12% APR compounded monthly is a 12.68% APY. Savings products advertise APY because it looks higher; loans quote APR for the same reason.
Does this account for inflation and tax?▼
No, the result is a nominal figure. Subtract inflation for real purchasing power — 7% growth with 3% inflation is roughly 4% real. Interest is also normally taxable in the year it is earned, which reduces the amount left to compound.
Further Reading
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