Compound Interest Calculator
See how your savings and investments grow with the power of compound interest.
Investment Details
Future Value
$302,370
APY: 7.23% · Rule of 72: 10.3 years to double
Total Deposits
$130,000
Total Interest
$172,370
Real Value
$167,415
Growth Breakdown
Year-by-Year Growth
| Year | Balance | Deposits | Interest | Year Interest |
|---|---|---|---|---|
| 1 | $16,955 | $16,000 | $955 | $955 |
| 2 | $24,413 | $22,000 | $2,413 | $1,458 |
| 3 | $32,411 | $28,000 | $4,411 | $1,997 |
| 4 | $40,986 | $34,000 | $6,986 | $2,575 |
| 5 | $50,182 | $40,000 | $10,182 | $3,195 |
| 6 | $60,042 | $46,000 | $14,042 | $3,860 |
| 7 | $70,614 | $52,000 | $18,614 | $4,573 |
| 8 | $81,952 | $58,000 | $23,952 | $5,337 |
| 9 | $94,108 | $64,000 | $30,108 | $6,157 |
| 10 | $107,144 | $70,000 | $37,144 | $7,036 |
| 11 | $121,122 | $76,000 | $45,122 | $7,978 |
| 12 | $136,110 | $82,000 | $54,110 | $8,988 |
| 13 | $152,182 | $88,000 | $64,182 | $10,072 |
| 14 | $169,416 | $94,000 | $75,416 | $11,234 |
| 15 | $187,895 | $100,000 | $87,895 | $12,480 |
| 16 | $207,710 | $106,000 | $101,710 | $13,815 |
| 17 | $228,958 | $112,000 | $116,958 | $15,248 |
| 18 | $251,742 | $118,000 | $133,742 | $16,784 |
| 19 | $276,173 | $124,000 | $152,173 | $18,431 |
| 20 | $302,370 | $130,000 | $172,370 | $20,197 |
Disclaimer
- Returns are hypothetical and don't guarantee future results.
- Tax treatment varies by account type (taxable, IRA, 401k, HSA).
- Actual compounding may differ based on product terms.
What Is Compound Interest?
Compound interest is interest earned on both your original principal and on previously earned interest. Unlike simple interest (calculated only on the principal), compounding creates a snowball effect — your money grows faster and faster over time. Einstein reportedly called it the "eighth wonder of the world."
The Compound Interest Formula
A = P(1 + r/n)^(nt), where:
- A = final amount
- P = principal (initial deposit)
- r = annual interest rate (decimal)
- n = number of times interest compounds per year
- t = number of years
The Rule of 72
Divide 72 by your interest rate to estimate how many years it takes for your money to double. At 7% annual return, your money doubles roughly every 10.3 years. At 10%, every 7.2 years. This quick mental math helps you gauge long-term growth potential.
Compounding Frequency Matters
Daily compounding earns slightly more than monthly, which earns more than annual. However, the difference is modest for most savings rates. What matters far more is the interest rate itself and — most importantly — time. Starting 10 years earlier has a dramatically larger impact than daily vs monthly compounding.
| $10,000 at 7% | 10 Years | 20 Years | 30 Years |
|---|---|---|---|
| Monthly Compounding | $20,097 | $40,387 | $81,165 |
| Annual Compounding | $19,672 | $38,697 | $76,123 |
How to Maximize Compound Interest
- Start early — time is the most powerful factor
- Contribute consistently — even small monthly amounts add up
- Reinvest dividends and interest — let compounding do its work
- Minimize fees — high fees eat into your compounding base
- Use tax-advantaged accounts — 401(k), IRA, Roth IRA avoid annual tax drag
Frequently Asked Questions
What's the difference between APR and APY?
APR (Annual Percentage Rate) is the stated rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding. A 5% APR with monthly compounding becomes a 5.12% APY. When comparing savings accounts, always compare APY.
How does inflation affect my returns?
Inflation erodes purchasing power. If your investments earn 7% and inflation is 3%, your real return is about 4%. Use this calculator's inflation adjustment to see your money in today's dollars.
Is compound interest taxed?
In taxable accounts, interest and dividends are typically taxed in the year they're earned. Tax-deferred accounts (Traditional IRA, 401k) are taxed on withdrawal. Tax-free accounts (Roth IRA) are never taxed on qualified withdrawals.