Compound Interest Calculator
Try it
- Final Balance
- Interest Earned
- Total Contributions
- Total Return
- APY (Effective Annual Rate)
- Time to Double
Note: Results are illustrative only and do not account for taxes, fees, or inflation. This calculator does not constitute financial advice. Past performance does not guarantee future results.
Formula
A = P × (1 + r/n)^(n×t) | with contributions: A = P×(1+r/n)^(nt) + C×[(1+r/n)^(nt)−1]÷(r/n)Worked Example
Inputs
- Starting Balance (P, USD)
- $1,000.00
- Regular Contribution
- $100/month
- Annual Rate (r)
- 5% (APY: 5.12%)
- Compounding Frequency (n)
- Monthly
- Time Period (t)
- 10 years
Result
- Final Balance (USD)
- $17,175.24
- Total Contributions
- $12,000.00
- Total Interest Earned
- $4,175.24
- Total Return on Invested Capital
- 32.12%
- APY (Effective Annual Rate)
- 5.12%
With a $1,000.00 investment at 5% annual interest, compounded monthly, after 10 years your balance grows to $17,175.24, earning $4,175.24 — a total return of 32.12%.
Frequently Asked Questions
- What is the difference between APR and APY in compound interest?
- APR (Annual Percentage Rate) is the nominal interest rate without compounding. APY (Annual Percentage Yield) is the effective annual rate after compounding is applied. For monthly compounding at 5% APR, the APY is approximately 5.12%. APY is always equal to or higher than APR.
- How often should interest compound to maximise returns?
- More frequent compounding produces higher returns, but the marginal benefit decreases with frequency. The difference between monthly and daily compounding is small. The biggest jump is from annual to monthly compounding. Continuous compounding (the theoretical maximum) uses the formula A = Pe^(rt).
- Can compound interest work against me?
- Yes — compound interest on debt (credit cards, loans) works against you in the same way it works for savings. If you carry a credit card balance at 20% APR compounded daily, the effective annual rate is approximately 22.1%. This is why paying off high-interest debt often gives a better guaranteed return than investing.
- What is the Rule of 72 and how does it relate to compound interest?
- The Rule of 72 is a quick mental shortcut: divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 6% annually, 72 ÷ 6 = 12 years to double. This approximation works best for rates between 6% and 10%.
- Does this calculator account for taxes or inflation?
- No — this calculator shows nominal (pre-tax, pre-inflation) growth. To estimate real returns, subtract your expected inflation rate from the interest rate before calculating. For example, at 5% interest and 2.5% inflation, your real return is approximately 2.5%. Tax treatment depends on the account type and jurisdiction.
- What is the formula for compound interest?
- A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual rate (as a decimal), n is the number of times interest compounds per year, and t is the time in years. For example, with a 1,000 starting balance at 5% annual rate compounded monthly for 5 years: A = 1000 × (1 + 0.05/12)^(12×5) = 1,283.36.
Source & Methodology
- Tier 3 — Reference
- Compound Interest Definition and Formula
Standard formula A = P(1 + r/n)^(nt). Tier 3 supporting; formula itself is mathematical standard with no regulatory variance. - Tier 1 — Government / Official
- Federal Reserve: Saving and the Interest Rate
Tier-1 source confirming standard compound interest mechanics in savings context.