Compound interest calculator

Visualize the “magic of time”: start with an initial amount, add regular contributions, and watch interest grow. The chart separates what you put in (principal) from what you earned (interest).

Initial investment
$
Interest rate
%
Duration
Compounding frequency
Total principal
$
Total interest
$
Total balance
$
Effective annual rate
%
⚠️ Estimates are for informational purposes only. Interest and dates may vary depending on your card’s exact rules (daily calculation, fees, rate changes). Use this plan as a guide, not as an official statement.
Period Start balance Deposits Withdrawals Interest End balance

Understanding compound interest

Compound interest means you earn interest not only on your original principal, but also on the interest already earned. In other words, your money can start to “snowball” over time.

How it works (step by step)

  1. You start with an initial amount (the principal).
  2. Each period (month, year…), interest is calculated on the current balance.
  3. The interest is added to the balance.
  4. Next period, interest is calculated again on the larger balance.

Why compounding frequency matters

The more often interest compounds (monthly vs yearly), the sooner interest gets added to the balance, and the sooner you earn interest on that interest. For the same stated annual rate, compounding more frequently usually produces a slightly higher effective return.

Deposits and withdrawals

Regular deposits can dramatically increase the final balance because the earliest deposits have the most time to compound. Withdrawals work the other way: taking money out reduces the base on which future interest is earned.

Common uses

Advantages (and what to watch for)

This calculator is an educational estimator. Real products can use different day-count conventions, rounding, compounding rules, fees, and taxes.

FAQ - Compound interest

What is compound interest?

It’s interest calculated on both the principal and the interest already earned. Over time, this “interest on interest” can accelerate growth compared to simple interest.

What’s the difference between compound interest and simple interest?

Simple interest is calculated only on the initial principal. Compound interest is calculated on the principal plus previously earned interest, so the balance typically grows faster as time passes.

What is the compound interest formula?

A common formula is A = P × (1 + r/n)^(n×t), where P is the initial principal, r is the annual rate (as a decimal), n is the compounding frequency per year, and t is time in years. With regular deposits or withdrawals, results are usually computed using period-by-period cash flows.

Does compounding frequency matter a lot?

For the same stated annual rate, more frequent compounding usually increases the effective annual rate slightly. The difference can be small, but it becomes more noticeable with higher rates and longer durations.

What is the effective annual rate (EAR) and why is it important?

EAR is the true yearly rate after taking compounding into account. It helps you compare accounts or investments that advertise the same nominal rate but compound at different frequencies.

How do regular deposits affect compound interest?

Regular deposits increase the principal over time, which increases the base that earns interest. Consistent contributions can have a large impact on long-term growth, especially over many years.

Why do deposits at the start vs end change results?

Money deposited earlier has more time to earn interest. In Advanced mode, “Start of month” deposits earn interest during that period, while “End of month” deposits start compounding next period.

How do withdrawals affect compound interest?

Withdrawals reduce the balance that earns interest, which can significantly slow down growth. Large or frequent withdrawals can even outweigh interest earned and lead to a declining balance over time.

Is a higher interest rate always better?

A higher rate generally increases growth, but you should also consider risk, fees, account restrictions, taxes, and inflation. Two options with the same rate can still produce different outcomes due to compounding rules or costs.

How does inflation impact compound interest returns?

Inflation reduces purchasing power over time. Even if your balance grows, your “real” return is what matters: roughly your investment return minus inflation (and taxes, if applicable).

Is compound interest taxed?

It depends on your country, account type, and whether the gains are realized. Some accounts are tax-sheltered, while others may tax interest income annually. Always check local rules for your situation.

Are the results exact?

They are estimates for planning and learning. Financial institutions may use different calendars (exact days), rounding, compounding rules, fees, or taxes, which can change final results.

What inputs have the biggest impact on compound interest?

Time is often the biggest factor, followed by the interest rate, contribution amount, and contribution consistency. Small changes can compound into large differences over long horizons.

How can I use this compound interest calculator effectively?

Try multiple scenarios: adjust the rate, time horizon, and contribution schedule. Use Advanced mode to model deposits and withdrawals, and compare the yearly vs monthly breakdown to understand how growth accumulates.