Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which is only calculated on the principal, compound interest allows your money to grow exponentially over time as you earn interest on your interest.

The more frequently interest is compounded, the more you earn. Daily compounding yields slightly more than monthly, which yields more than quarterly or yearly. However, the difference between daily and monthly compounding is usually small. The biggest jump is from yearly to monthly compounding.

APR (Annual Percentage Rate) is the stated annual interest rate without accounting for compounding. APY (Annual Percentage Yield) includes the effect of compounding and reflects the actual amount you earn in a year. APY is always equal to or higher than APR when interest compounds more than once per year.

The Rule of 72 is a quick way to estimate how long it takes for an investment to double. Divide 72 by the annual interest rate to get the approximate number of years. For example, at 6% interest, your money doubles in roughly 72 / 6 = 12 years.

Both matter, but time and consistency are the most powerful factors. A larger initial investment benefits more from compounding early on, while regular monthly contributions steadily build wealth. Ideally, start with as much as you can and contribute consistently. Even small monthly contributions add up significantly over decades.