Compound Interest Calculator
Enter your principal, rate, and time to see how compounding grows your money.
Results
Final Amount
$20,096.61
Principal
$10,000.00
Interest Earned
$10,096.61
Effective APY
7.23%
Total Growth
101.0%
How Compound Interest Works
Compound interest means you earn interest on your interest, not just on your original principal. Each compounding period, your earned interest gets added to the balance, and the next period's interest is calculated on that larger amount. Over time, this snowball effect creates exponential growth that simple interest can never match.
The formula is where 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 time in years. For example, $10,000 invested at 7% compounded monthly for 30 years grows to $81,585, compared to just $31,000 with simple interest. That extra $50,585 is the power of compounding.
The frequency of compounding matters, but less than most people think. At 7%, daily compounding produces an effective APY of 7.250% versus 7.229% for monthly, a difference of just 0.021%. What actually moves the needle is time in the market and the rate itself. Starting 10 years earlier typically doubles your final balance.
A useful shortcut is the Rule of 72: divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 6%, money doubles in roughly 12 years. At 9%, it doubles in 8 years. Use this to quickly compare investment options without a calculator.
Frequently Asked Questions
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the stated interest rate without compounding. APY (Annual Percentage Yield) reflects the actual return after compounding is applied. A savings account with 7% APR compounded monthly has an APY of 7.229%. Always compare APY to APY when evaluating savings accounts or CDs.
Is compound interest good or bad?
It depends on which side you're on. When you're investing or saving, compound interest works in your favor. Your returns generate their own returns. When you're borrowing (credit cards, loans), compound interest works against you, growing your debt faster than you might expect. This is why paying off high-interest debt before investing is often the right move.
How much does $10,000 grow at 7% for 10 years?
$10,000 at 7% compounded monthly for 10 years grows to $20,097, roughly doubling your money. For 20 years it reaches $40,388, and for 30 years it reaches $81,585. This illustrates why time is the most powerful variable: each decade more than doubles the previous result.
What compounding frequency should I use?
Use whatever frequency matches your actual account. Most savings accounts and CDs compound daily or monthly. Most bonds compound semi-annually. For general projections, monthly is a safe default. The difference between daily and monthly compounding is typically less than 0.03% annually, which is negligible compared to the rate itself.