What is the difference between simple and compound interest?

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any previously earned interest. This means compound interest grows much faster over time, especially for longer investment periods.

How often should interest compound for maximum growth?

More frequent compounding generally results in higher returns. Daily compounding is better than monthly, which is better than annually. However, the difference becomes less significant at higher frequencies, and many investments compound monthly or quarterly.

What is a realistic rate of return for investments?

Historical stock market returns average around 7-10% annually over long periods. Conservative investments like bonds might return 3-5%, while savings accounts currently offer 1-2%. Always consider inflation when evaluating real returns.

How much difference does starting early make?

Starting early makes an enormous difference due to compound interest. For example, investing $1,000 at age 25 versus age 35 could result in tens of thousands more dollars by retirement, even with the same contribution amounts.

Compound Interest Calculator – Investment Growth Tool

Calculate compound interest instantly. See how your investments grow over time with our free compound interest calculator.

Compound Interest Calculator – Investment Growth Tool

Calculate compound interest instantly. See how your investments grow over time with our free compound interest calculator.

Initial Investment*

Starting amount to invest

Annual Interest Rate (%)*

Expected annual return rate

Time Period (years)*

Investment time horizon

Compounding Frequency*

How often interest compounds

$1,276

Final Amount

$1,000

Principal

$276

Growth

The Power of Compound Interest

Compound interest is often called the "eighth wonder of the world" because it allows your money to grow exponentially over time. Unlike simple interest, compound interest earns returns not just on your initial investment, but also on all the interest that has been added to your account.

How Compound Interest Works

When you invest money, you earn interest on your principal. With compound interest, that earned interest is added to your principal, and then you earn interest on the new, larger amount. This creates a snowball effect where your money grows faster and faster over time.

A = P(1 + r/n)^(nt) where A=Final Amount, P=Principal, r=Annual Rate, n=Compounding Frequency, t=Time