What is compound interest?
Compound interest means you earn interest on your interest. Each period, interest is added to the balance, and the next period's interest is calculated on that larger balance. Over long periods, the growth curve bends upward.
The rule of 72
Divide 72 by the annual rate to estimate how many years it takes money to double. At 6%, money doubles in about 12 years; at 9%, about 8 years. It is a quick estimate, not an exact answer.
Time matters more than you think
| Monthly saving | 10 years | 20 years | 30 years |
|---|---|---|---|
| $50 | $7,764 | $20,552 | $41,613 |
| $100 | $15,528 | $41,103 | $83,226 |
| $200 | $31,056 | $82,207 | $166,452 |
| $500 | $77,641 | $205,517 | $416,129 |
Starting earlier gives interest more time to compound. Even small monthly amounts add up.
APY vs. APR
Banks show APY (annual percentage yield) for savings, which already includes compounding. If you know the APY, choose “Annually” compounding here and enter the APY as the rate.
Compound Interest Calculator FAQs
How is compound interest calculated monthly?
The annual rate is divided by 12 and applied to the balance each month. Each month's interest is added to the balance before the next month is calculated.
What is the difference between simple and compound interest?
Simple interest is earned only on the original amount. Compound interest is also earned on previously added interest, so the balance grows faster.
How long does it take to double my money?
Use the rule of 72: divide 72 by the annual rate. At 4%, roughly 18 years; at 8%, roughly 9 years.
Are contributions added at the start or end of the month?
This calculator adds contributions at the end of each month, a common and slightly conservative assumption.