What Is Compound Interest?
Compound interest is interest earned on both your original money and on the interest it has already earned. Unlike simple interest, which only pays on the principal, compounding reinvests every dollar of growth so your balance snowballs — slowly at first, then dramatically. Einstein reputedly called it the eighth wonder of the world, and the math backs the hype: at a 7% annual return, money doubles roughly every 10 years with no extra effort.
How to Use This Compound Interest Calculator
Enter your starting amount, a monthly contribution, an expected annual interest rate, and the number of years to grow. Pick how often interest compounds (monthly is typical for savings accounts and index funds). The calculator shows your future value, how much you contributed versus how much came purely from compounding, and your total interest earned.
The Compound Interest Formula
The core formula is A = P(1 + r/n)^(nt), where P is principal, r is the annual rate, n is compounding periods per year, and t is years. When you add regular deposits, a future-value-of-an-annuity term is added on top. This calculator combines both automatically.
Worked example: Invest $10,000 up front plus $300/month at 7% for 30 years. You contribute $118,000 total, but end with about $430,000 — over $312,000 of it pure compounding. Start the same plan 10 years later and you end near $190,000. Time, not the amount, is the biggest lever.
Why Starting Early Beats Investing More
Because compounding accelerates over time, the earliest dollars do the heaviest lifting. Someone who invests $300/month from age 25 to 35 and then stops often ends up with more than someone who starts at 35 and invests for 30 straight years. Put your money to work in tax-advantaged accounts first — see our Roth IRA Growth Calculator, 401(k) Calculator, and Savings Goal Calculator to apply compounding to specific goals.