How to Use the Compound Interest Calculator
Compound interest is interest calculated on both the principal and the accumulated interest from previous periods. The formula is A = P × (1 + r/n)^(n×t), where P is the principal, r is the annual rate as a decimal, n is the number of compounding periods per year, and t is the time in years.
This calculator shows the final amount, total interest earned, growth ratio, and the Rule-of-72 estimate for doubling time. More frequent compounding (monthly vs. annual) at the same rate always produces slightly higher returns, because interest is reinvested sooner. Switching from annual to monthly compounding at 6% for 20 years adds only about 0.5% more — but the long-term compounding effect itself is the real power.
The Rule of 72 is a quick mental math shortcut: divide 72 by the annual rate (%) to estimate years to double. At 4% annual rate, you double in roughly 18 years; at 9%, about 8 years. Compare with simple interest using our Simple Interest Calculator to see how much of a difference compounding makes.
Frequently Asked Questions
Simple interest is calculated only on the principal. Compound interest is calculated on the principal plus previously accumulated interest. Over long periods, the difference becomes enormous.
More frequent compounding yields slightly more. Daily compounding is marginally better than monthly, which is better than annual. However, the annual rate itself has a far greater impact than the compounding frequency.
A quick way to estimate how long it takes to double your money: divide 72 by the annual interest rate (%). At 6% per year, you double in approximately 12 years.