Compound Interest Calculator

Frequently Asked Questions

What is the compound interest formula?

The compound interest formula is A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the time in years. The calculator handles all four compounding frequencies.

How much more does daily compounding earn vs. monthly?

The difference is smaller than most people expect. On $10,000 at 5% for 10 years: monthly compounding yields $16,470; daily compounding yields $16,487. The gap is only $17. However, on very large balances or very long periods, the difference becomes more meaningful.

What is the Rule of 72?

The Rule of 72 estimates how long it takes money to double: divide 72 by the annual interest rate. At 6%, money doubles in roughly 12 years (72 ÷ 6). At 8%, it doubles in 9 years. It's a quick mental math shortcut that works well for rates between 4% and 12%.

What is the difference between APY and APR in savings?

APR (Annual Percentage Rate) is the stated interest rate without compounding. APY (Annual Percentage Yield) is the effective rate after compounding is accounted for. A 5% APR compounded monthly equals a 5.116% APY. Banks are required to disclose APY on savings accounts so you can compare rates accurately.

How does inflation affect compound interest growth?

To find real (inflation-adjusted) growth, subtract the inflation rate from your investment return. If your savings earn 7% and inflation is 3%, your real return is approximately 4%. Use the real return in the calculator to see the purchasing-power growth of your savings.

Can I use this to model retirement savings?

Yes. Enter your current savings as the principal, your expected average annual return (e.g. 7% for a diversified stock index fund historically), and the years until retirement. The future value shown is your projected balance, not accounting for ongoing contributions. For contribution modeling, add expected annual additions manually.

Why does compounding frequency matter less at low interest rates?

At low rates (e.g. 1–2%), the mathematical difference between annual and daily compounding is negligible — a fraction of a percent. The compounding frequency effect grows significantly as interest rates increase. At high rates (10–20%), switching from annual to daily compounding noticeably increases returns.