Compound Interest Calculator

How to calculate compound interest

Enter a starting balance, an annual rate, a number of years, and how many times a year the interest compounds. The calculator raises (1 + rate / frequency) to the power of frequency x years and multiplies the principal by it.

The result splits into the final amount, the interest earned on top, and the principal you started with, so you can see how much of the balance is growth.

• Enter your starting balance in the Principal field. It starts at 1000.
• Enter the yearly rate in the Annual rate (%) field. It starts at 5.
• Enter the horizon in the Years field. It starts at 10.
• Set Compounds per year to 1 for annual, 4 for quarterly, 12 for monthly, or 365 for daily. It starts at 12.
• Read the Final amount and Interest earned lines, and lower the rate by your inflation assumption if you want the answer in today's money.

Daily, monthly, quarterly, and annual compounding compared

Compounding frequency is the field people expect to matter most and it matters least. Take 1000 at 5 percent for 10 years. Compounded once a year it grows to 1628.89. Compounded monthly it reaches 1647.01. Compounded daily it reaches about 1648.66, and continuous compounding, the mathematical ceiling, is 1648.72. The whole span from yearly to infinitely often is under 20 on a 1000 deposit.

What does move the needle is the rate and the number of years, because years are an exponent and frequency is only a correction on the rate. Doubling the horizon from 10 years to 20 takes the same 1000 at 5 percent compounded monthly from 1647.01 to 2712.64, and 30 years reaches 4467.74. Time is the lever.

• Annual, 1 compound a year: 1628.89.
• Quarterly, 4 compounds a year: 1643.62.
• Monthly, 12 compounds a year: 1647.01.
• Daily, 365 compounds a year: about 1648.66.
• All four assume 1000 at 5 percent for 10 years.

How long money takes to double

The rule of 72 says divide 72 by the rate to get the doubling time, so 6 percent doubles in about 12 years. With monthly compounding the true answer is 11.58 years, a little faster, because the rule was built as mental arithmetic for annual compounding. At 7 percent the rule says 10.29 years and the real figure is 9.93.

You can check either claim on this page. Enter a principal of 1000 at 6 percent for 11.58 years compounded monthly and the final amount reads 1999.84, within a rounding error of double. That round trip is a fair test of whether a growth claim you have been shown is arithmetic or marketing.

The same formula runs in reverse for debt, where compounding works against you. For a balance with a payment against it, the Credit Card Payoff Calculator and the Debt Payoff Calculator model the shrinking side of the same math. If you are adding money every month rather than leaving one lump sum alone, use the Investment Calculator instead.

• At 6 percent compounded monthly, money doubles in 11.58 years.
• At 7 percent compounded monthly, it doubles in 9.93 years.
• The rule of 72 is a close approximation, not the exact answer.
• Nothing here is adjusted for inflation, tax, or fees.