Compound Interest Calculator
Compounding is the difference between saving and investing. This calculator lets you vary the rate, the horizon and — crucially — the compounding frequency, which is the input most people leave at 'annual' without realising how much it moves the final figure.
Inputs
Result
259,374.25
Interest earned 159,374.25
Visual breakdown
How it works
A = P (1 + r/n)^(n·t)
- 1n = 1 compounding periods per year
- 2A = 100,000 × (1 + 0.1/1)^(1×10) = 259,374.25
How the compound interest calculator works
A = P × (1 + r/n)^(n × t). P is the starting amount, r the annual rate as a decimal, n the compounding periods per year, and t the years.
Interest earned = A − P. Because the exponent is n × t, both frequency and time work multiplicatively rather than additively.
Continuous compounding is the theoretical ceiling: A = P × e^(r × t). Daily compounding already sits very close to it.
Worked example: 100,000 at 10% for 10 years, by frequency
- Annual (n = 1): 100,000 × 1.1^10 = 259,374.
- Quarterly (n = 4): 100,000 × 1.025^40 = 268,506.
- Monthly (n = 12): 100,000 × (1 + 0.10/12)^120 = 270,704.
- Daily (n = 365): 271,790. Same rate, same decade — an 12,400 spread purely from frequency.
Common mistakes to avoid
Confusing nominal rate with effective yield
10% compounded monthly is an effective 10.47%. When comparing deposits, compare effective annual yields or the numbers are not the same units.
Entering the rate as a whole number
The formula needs 0.10, not 10. Getting this wrong produces absurd growth that is easy to spot but easy to publish.
Ignoring inflation and tax
A 10% nominal return with 6% inflation is roughly 3.8% real growth. Compounding works on the real rate when you are measuring purchasing power.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal; compound interest is calculated on principal plus accumulated interest. Over long horizons the gap becomes enormous.
How often does compounding actually matter?
Most at high rates and long horizons. At 3% over two years the frequency is nearly irrelevant; at 12% over 25 years it changes the outcome materially.
What is the rule of 72?
Divide 72 by the rate to estimate the doubling time. At 9%, money doubles in roughly eight years — a useful mental check on any projection.
Does compounding work against me on debt?
Exactly the same way. Unpaid credit card interest compounds monthly, which is why revolving balances grow faster than borrowers expect.
Should I add regular contributions?
Contributions usually dominate the outcome in the first decade, and compounding dominates later. A SIP calculator models the recurring-deposit version of this formula.
Learn more
What Is Compound Interest?
Why compounding frequency matters more than most people expect.
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