Compound Interest Calculator
Calculate how your investments grow over time with the power of compounding interest.
Understanding Compound Interest
Compound interest is often called the "eighth wonder of the world." Unlike simple interest, which is calculated only on the principal, compound interest is calculated on the principal plus all previously earned interest. This creates exponential growth over time. The key factors are: principal amount, interest rate, compounding frequency, and time. Starting early is the most powerful strategy — even small amounts invested in your 20s can grow to significant wealth by retirement.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. It causes wealth to grow exponentially over time.
How often does interest compound?
Interest can compound daily, monthly, quarterly, or annually. More frequent compounding results in slightly higher returns.
What is a good interest rate to expect?
Historically, the S&P 500 has returned about 10% annually (7% inflation-adjusted). Savings accounts typically offer 4-5% in high-yield accounts.