Compound Interest Calculator
Calculate compound interest with different frequencies and see the power of compounding over time
Understanding Compound Interest
The Power of Compounding
Compound interest is "interest on interest." Your money grows not just on the original principal, but also on all the interest you've earned over time.
The Rule of 72
Divide 72 by your interest rate to estimate how long it takes to double your money. At 5%, your money doubles in approximately 14 years.
Frequency Matters
More frequent compounding means more growth, but the difference diminishes as frequency increases. Daily vs. monthly compounding often shows minimal difference.
Start Early
Time is the most powerful factor in compound interest. Starting early, even with smaller amounts, often beats larger contributions started later.
How to Use the Compound Interest Calculator
Our compound interest calculator helps you understand how your money grows when interest is compounded at different frequencies. Here's how to use it:
Enter your initial principal amount
Set the annual interest rate
Choose time period and compounding frequency
See your compound interest growth and comparisons
Understanding Compound Interest
Compound interest is often called the "eighth wonder of the world" because it allows your money to grow exponentially over time. Unlike simple interest, compound interest earns interest on both the original principal and previously earned interest.
How Compounding Frequency Affects Your Returns
More Frequent = More Growth
The more frequently interest is compounded, the more your money grows. However, the difference between daily and monthly compounding is often minimal for most practical purposes.
Effective Annual Rate
The effective annual rate shows the true annual return when compounding is considered. This rate is always higher than the nominal rate when compounding occurs more than once per year.
The Rule of 72
Divide 72 by your interest rate to estimate how long it takes to double your money. For example, at 6% interest, your money doubles in approximately 12 years (72 ÷ 6 = 12).
Time is Key
The longer your money compounds, the more dramatic the effect. Starting early, even with smaller amounts, often beats larger contributions started later due to the power of time.
The Compound Interest Formula
A = P(1 + r/n)^(nt)
A = Final amount
P = Principal (initial amount)
r = Annual interest rate (decimal)
n = Number of times interest compounds per year
t = Time in years
Example Calculation
$10,000 invested at 5% annual interest, compounded monthly for 10 years:
A = 10,000(1 + 0.05/12)^(12×10)
A = 10,000(1.004167)^120
A = $16,470.09
Total interest earned: $6,470.09
Frequently Asked Questions
What's the difference between simple and compound interest?
Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and previously earned interest. Compound interest grows much faster over time.
Does compounding frequency really matter?
Yes, but the impact diminishes as frequency increases. The difference between annual and daily compounding is significant, but the difference between daily and continuous compounding is minimal.
Where can I find accounts with compound interest?
Most savings accounts, CDs, and investment accounts use compound interest. High-yield savings accounts and money market accounts typically compound daily, while CDs may compound monthly or quarterly.
Where can I find accounts with compound interest?
Most savings accounts, CDs, and investment accounts use compound interest. High-yield savings accounts and money market accounts typically compound daily, while CDs may compound monthly or quarterly.
How often should I add money to maximize compound interest?
The sooner you add money, the longer it has to compound. Monthly contributions are practical for most people and allow you to take advantage of dollar-cost averaging in investment accounts.
Disclaimer
This compound interest calculator is provided for informational and estimation purposes only. While we strive to keep our calculations accurate and up-to-date, laws and regulations change frequently, and individual situations can vary significantly. The results should not be considered as financial or tax advice.
NexusCalc does not guarantee the accuracy of calculations and is not responsible for any errors or omissions. Rates and rules may have changed since our last update. Please consult with a qualified professional before making financial decisions based on these calculations.
By using this compound interest calculator, you acknowledge that you are using the information at your own risk and that NexusCalc shall not be liable for any damages or losses resulting from your reliance on the information provided.
Last updated: November 2025