Compound Interest Calculator
See how your investments can grow with the power of compounding.
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What is Compound Interest?
Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. Often referred to as "interest on interest," it allows your investment to grow at an accelerating rate compared to simple interest, which is calculated only on the principal amount. This calculator demonstrates the significant impact that compounding can have on your savings over time, especially when you make regular contributions.
Frequently Asked Questions (FAQ)
What is Compound Interest?
Compound interest is the interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan. Often called 'interest on interest,' it makes a sum grow at a faster rate than simple interest.
How is Compound Interest calculated?
The formula for compound interest is A = P(1 + r/n)^(nt), where P is the principal amount, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years. For investments with regular contributions, the formula is more complex, but our calculator simplifies this process for you.
What does 'compounding frequency' mean?
Compounding frequency is how often the interest is calculated and added to your principal. More frequent compounding (like monthly or quarterly) will result in slightly higher returns than less frequent compounding (like annually) because you start earning interest on your interest sooner.
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