Finance
Compound Interest Calculator: Build Wealth Over Time
Discover how compound interest works and grow savings exponentially.
Compound interest is earned on both principal AND previously earned interest, causing exponential growth.
Formula
A = P(1 + r/n)^(nt). More frequent compounding = faster growth.
Why Starting Early Matters
Investing $200/month from age 25-35 ($24K total) beats $200/month from 35-65 ($72K total) at the same rate.
Compounding Frequency
- Annually: Once per year
- Monthly: Most common
- Daily: High-yield accounts
- Continuously: Theoretical maximum
Rule of 72
Divide 72 by annual return to estimate doubling time. At 8%, money doubles every 9 years.
Frequently Asked Questions
Simple vs compound?
Simple: on principal only. Compound: on principal + accumulated interest, causing exponential growth.
Regular contributions?
Each contribution also earns compound interest, building significant wealth.
What is APY?
Annual Percentage Yield accounts for compounding. Always higher than nominal rate with multiple periods.