Compound Interest
Calculate compound interest on investments with regular contributions
Calculators on this site provide estimates for general informational purposes only. They are not financial, investment, tax, or legal advice. Consult a qualified professional before making any decision.
How to use Compound Interest
- 1Enter the starting principal, the amount you invest at the beginning.
- 2Fill in the annual return, the investment horizon and the compounding frequency (yearly, half-yearly, quarterly or monthly).
- 3If you add money regularly, enter the recurring contribution to see the total including those deposits.
The compound interest formula
A = P × (1 + r/n)^(n·t)A is the final amount, P the principal, r the annual rate, n how many times interest compounds per year, and t the number of years. Compounding means interest earns interest: each period's interest joins the principal and earns a return in the next period, so the growth curve steepens over time. Simple interest, by contrast, is paid only on the original principal and never earns anything itself.
More frequent compounding yields a larger total, but with diminishing returns: moving from yearly to half-yearly adds about 1.1%, and moving on to monthly adds roughly another 1.1%. What really moves the needle is time and rate. A handy shortcut is the rule of 72: years to double ≈ 72 ÷ annual return in percent, so 6% doubles in about 12 years and 9% in about 8.
| Frequency | Times per year | Total after 20 years | Extra vs yearly |
|---|---|---|---|
| Yearly | 1 | ≈ 320,714 | — |
| Half-yearly | 2 | ≈ 324,340 | ≈ 3,626 |
| Quarterly | 4 | ≈ 326,204 | ≈ 5,490 |
| Monthly | 12 | ≈ 327,758 | ≈ 7,044 |
How compounding frequency changes the total (100,000 at 6% for 20 years)
Frequently asked questions
What is the difference between compound and simple interest?
Simple interest is paid only on the principal, so it never earns anything itself. Compound interest adds each period's interest to the principal so it earns a return too. On 100,000 at 6% for 20 years, simple interest totals 220,000 while yearly compounding reaches about 320,700, a gap of more than 100,000 that widens the longer you wait.
What is the rule of 72?
A quick way to estimate doubling time: years to double ≈ 72 ÷ annual return in percent. At 6% money doubles in about 12 years, at 9% in about 8, at 3% in about 24. It is most accurate between 6% and 10% and drifts at much higher rates.
Does the compounding frequency matter much?
It matters, but less than people expect. On 100,000 at 6% over 20 years, yearly compounding gives about 320,700 and monthly about 327,800, only about 2.2% more. Investing five years longer or earning one extra percentage point moves the result far more, so focus on time and rate rather than frequency.
Is the annualised return what I actually receive?
Usually not. The annualised return is a nominal growth rate; your net result is reduced by management fees, entry and exit charges and tax. If you add or withdraw money along the way, your personal return differs from the headline rate and is better measured with an internal rate of return (IRR).
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