Compound Interest Calculator: Understand Long-Term Growth

The key difference between simple and compound interest is how the interest is calculated:

Simple Interest: Interest is calculated only on the original amount you deposit or borrow.

Compound Interest: Interest is calculated on both the original amount and the interest that accumulates over time.

Because of this, compound interest can lead to higher long-term growth compared to simple interest, especially over longer periods. The actual growth depends on your interest rate, the time period, and compounding frequency.

The Rule of 72 is a quick estimation method used to approximate how long it might take for an amount to double at a given annual interest rate. The formula is:

Approximate Years to Double = 72 ÷ Interest Rate

This is only an estimate and does not replace financial planning. It simply gives a rough idea of how different interest rates may affect growth over time.

Interest may be compounded on different schedules—such as annually, quarterly, monthly, or daily. The frequency affects how often interest is added to the total, which in turn affects future calculations.

More frequent compounding typically results in slightly higher growth, although the difference between monthly and daily compounding is usually smaller compared to the difference between annual and monthly compounding.

The calculator allows you to explore various frequencies to see how they influence long-term outcomes based on your inputs.

Many people contribute regularly to savings or investment accounts. Adding a fixed amount each month can significantly influence long-term totals because each contribution has the potential to compound over time.

The earlier contributions begin, the longer they have to grow. Even small, consistent contributions can make a meaningful difference over long periods. The calculator helps you visualize how regular deposits may affect estimated growth.

Understanding compound interest can support planning for long-term goals such as:

Saving for Education: Estimating future costs and determining how much needs to be saved regularly.

Building a Retirement Fund: Exploring how time and consistency may support long-term financial stability.

Creating an Emergency Fund: Understanding how savings can grow gradually over time.

While the calculator provides estimates, real-world results depend on many factors such as market performance, interest rate changes, inflation, and individual financial decisions.