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Compound Interest Calculator

Compound Interest Calculator Weekly, daily, monthly, or yearly compounding with monthly contributions to calculate how much your money can grow using compound interest.

Daily Compound Interest Calculator
Principal Amount:	$
Interest Rate:	%
Years:	years
Compound Period:
Contributions:	$
Make contributions at:	Start End of each compound period

A compound interest calculator with monthly contributions gives you the option to include monthly & yearly contributions.

The daily compound interest calculator can be used to calculate loans, investments, or savings with compound interest. A compound interest formula can be found below on how to calculate compound interest.

What is Compound Interest?

Compound interest is the interest you earn from interest when you lend or invest your money.

How Does Compound Interest Work?

Compound interest is how money can grow into money over time usually from investments.

The longer your money compounds, the more money you will have. Compound interest produces exponential growth instead of linear growth. Compound interest is one of the reasons why rich people become so rich.

Compound interest is what makes Warren Buffett one of the richest men on earth with a net worth of over 100 billion.

Compound Interest Formula

Below is the compound interest formula on how to calculate compound interest.

A = P (1 + r/n)^(nt), where:

A = is the future value of investment/loan including interest earned
P = is the principal investment or loan amount
r = is the annual interest rate in decimal
n = is the number of times that interest will be compounded per year
t = is the number of years the money is invested or borrowed

How to Calculate Compound Interest

To use the above compound interest formula, you will need a few variables defined, mainly the principal amount, annual interest rate, number of years, and compound periods.

For example, to find out how much would $10,000 grow in 10 years with an annual interest rate of 5% and compound monthly, we will plug in the variables to the compound interest formula.

A = (10000)(1+0.05/12)^(12*10) = $16,470.09

Your $10,000 initial principal will grow to $16,470.09 in 5 years.

Compound Interest Example

Let's take a look at an example. If you deposit $10,000 into your investment account and it has a growth rate of 5% each year, at the end of the first year, you will have $500 interest and a new balance of $10,500.

In the second year, your investment growth will be compounded based on the new balance of $10,500. A 5% of growth on $10,500 is $525, and your new balance at the end of the second year is $11,025.

After 30 years, your initial $10,000 investment will have grown into $43,219.42. or about 432%.

Year	Starting Balance	Interest Earned	Ending Balance
1	$10,000.00	$500.00	$10,500.00
2	$10,500.00	$525.00	$11,025.00
3	$11,025.00	$551.25	$11,576.25
4	$11,576.25	$578.81	$12,155.06
5	$12,155.06	$607.75	$12,762.82
6	$12,762.82	$638.14	$13,400.96
7	$13,400.96	$670.05	$14,071.00
8	$14,071.00	$703.55	$14,774.55
9	$14,774.55	$738.73	$15,513.28
10	$15,513.28	$775.66	$16,288.95
11	$16,288.95	$814.45	$17,103.39
12	$17,103.39	$855.17	$17,958.56
13	$17,958.56	$897.93	$18,856.49
14	$18,856.49	$942.82	$19,799.32
15	$19,799.32	$989.97	$20,789.28
16	$20,789.28	$1,039.46	$21,828.75
17	$21,828.75	$1,091.44	$22,920.18
18	$22,920.18	$1,146.01	$24,066.19
19	$24,066.19	$1,203.31	$25,269.50
20	$25,269.50	$1,263.48	$26,532.98
21	$26,532.98	$1,326.65	$27,859.63
22	$27,859.63	$1,392.98	$29,252.61
23	$29,252.61	$1,462.63	$30,715.24
24	$30,715.24	$1,535.76	$32,251.00
25	$32,251.00	$1,612.55	$33,863.55
26	$33,863.55	$1,693.18	$35,556.73
27	$35,556.73	$1,777.84	$37,334.56
28	$37,334.56	$1,866.73	$39,201.29
29	$39,201.29	$1,960.06	$41,161.36
30	$41,161.36	$2,058.07	$43,219.42
	Total	$33,219.42	$43,219.42

As you can see, money grows rapidly the longer you keep the money in the investment account.

A 5% growth rate might not seem like a lot during the first few years, but it can grow quickly as time passes.

Compound Interest with Monthly Contributions

As we can see from the previous example, a $10,000 investment with a 5% growth rate can grow into $43,219.42 in 30 years, what if you make a regular $200 monthly contribution on top of the $10,000 principal?

Year	Contributions	Total Investment	Interest	Total Interest	Ending Balance
0	$0	$10,000	$0	$0	$10,000
1	$2,400.00	$12,400.00	$564.52	$564.52	$12,964.52
2	$2,400.00	$14,800.00	$712.74	$1,277.26	$16,077.26
3	$2,400.00	$17,200.00	$868.38	$2,145.64	$19,345.64
4	$2,400.00	$19,600.00	$1,031.80	$3,177.43	$22,777.43
5	$2,400.00	$22,000.00	$1,203.39	$4,380.82	$26,380.82
6	$2,400.00	$24,400.00	$1,383.56	$5,764.38	$30,164.38
7	$2,400.00	$26,800.00	$1,572.73	$7,337.11	$34,137.11
8	$2,400.00	$29,200.00	$1,771.37	$9,108.48	$38,308.48
9	$2,400.00	$31,600.00	$1,979.94	$11,088.42	$42,688.42
10	$2,400.00	$34,000.00	$2,198.94	$13,287.36	$47,287.36
11	$2,400.00	$36,400.00	$2,428.88	$15,716.24	$52,116.24
12	$2,400.00	$38,800.00	$2,670.33	$18,386.57	$57,186.57
13	$2,400.00	$41,200.00	$2,923.84	$21,310.41	$62,510.41
14	$2,400.00	$43,600.00	$3,190.04	$24,500.45	$68,100.45
15	$2,400.00	$46,000.00	$3,469.54	$27,969.99	$73,969.99
16	$2,400.00	$48,400.00	$3,763.01	$31,733.00	$80,133.00
17	$2,400.00	$50,800.00	$4,071.17	$35,804.17	$86,604.17
18	$2,400.00	$53,200.00	$4,394.72	$40,198.89	$93,398.89
19	$2,400.00	$55,600.00	$4,734.46	$44,933.35	$100,533.35
20	$2,400.00	$58,000.00	$5,091.18	$50,024.53	$108,024.53
21	$2,400.00	$60,400.00	$5,465.74	$55,490.28	$115,890.28
22	$2,400.00	$62,800.00	$5,859.03	$61,349.31	$124,149.31
23	$2,400.00	$65,200.00	$6,271.98	$67,621.29	$132,821.29
24	$2,400.00	$67,600.00	$6,705.58	$74,326.87	$141,926.87
25	$2,400.00	$70,000.00	$7,160.86	$81,487.72	$151,487.72
26	$2,400.00	$72,400.00	$7,638.90	$89,126.63	$161,526.63
27	$2,400.00	$74,800.00	$8,140.85	$97,267.47	$172,067.47
28	$2,400.00	$77,200.00	$8,667.89	$105,935.36	$183,135.36
29	$2,400.00	$79,600.00	$9,221.28	$115,156.65	$194,756.65
30	$2,400.00	$82,000.00	$9,802.35	$124,958.99	$206,958.99

Using the formula above, with an initial investment of $10,000 and a $200 monthly deposit, your money will be worth $206,958.99 after 30 years. This is the power of compound interest.

To do the math quickly, you can use this Compound Interest Calculator with contributions (monthly & annual contributions) which gives you the option to calculate how much your money can grow with additional monthly or annual contributions.

You also have the option to adjust when the contribution is made at the start or end of each compound period.

How to use the compound interest formula?

Compound interest is the formula that wealthy people use to get ahead in life financially. All the rich people know how to use the compound formula in real life to turn money into more money.

Each of us has only 24 hours a day. If we rely only on our labor to make money, there is a limit to how much we can make. However, if we utilize compound interest to grow our money, even if we don't become wealthy, we can still retire comfortably.

To take advantage of compound interest, we must learn how to invest our money. If we deposit our money in a bank's savings account, we get less than 1% interest. The inflation rate is over 1% each year, meaning our money in the bank is losing value each year.

The same one hundred dollars that we deposited in the bank ten years ago is worth much less today because everything gets more expensive, and the purchasing power of the same amount of money is less than ten years ago.

To take advantage of the compound interest, we must invest the money in stocks, bonds, or real estate. Through investing, our money can grow 5-12% each year instead of losing value. Historically, in the long term, the stock market and real estate in the US always go up.

How to use compound interest to grow your money?

Of course, there are always risks involved in any type of investment. One needs to be ready for the risks in order to reap the reward. Investing doesn't simply mean you have someone else do the work for you, you should learn how investing works before you put your hard-earned money into it.

The average American hardly has any savings each month. Most Americans live paycheck to paycheck. If you want to invest, you must save a portion of your paycheck and dedicate that money to your investment account.

Instead of investing what's leftover from your paycheck after spending, you should put 10%-15% of your paycheck into your investment account before you start spending it.

The earlier you start investing, the better off you will be. The compound interest calculator will show you how much your money will grow after a certain year with options for monthly or yearly contributions.

Pros and Cons of Compound Interest

There are lots of benefits if you use compound interest for your finances correctly. However, compound interest will work against you if you use it the wrong way.

Pros of Compound Interest

Your money grows faster - with compound interest, your money can grow much faster because you are getting paid from the interest generated from your principal and interest. The accumulation of interest is how your money grows over time. Essentially, you are using your money to grow more money.
Starting small - if you don't have a large principal amount that you can put towards an investment or retirement account, you can always start small and then add to your account gradually. No matter your financial situation, you can always get started, the earlier the better.

Cons of Compound Interest

Large initial principal - if your initial principal amount is small and you are not looking to make a regular deposit, then your money might not grow much. If you only have $1,000 to put in, your money would only grow to $4,321.94 which is not a lot by today's standard.
Takes a long time - much of the compounding power is based on the later years of investment. If you withdraw your money after the first few years if you don't see the result quickly enough, then your money won't grow much. Not until the 10th year, or even 20 years will you see your money grow rapidly.
Debt - compound interest will work against you if you are in debt. If you owe a credit card or other debt that uses compound interest, your debt will compound and grow fast because you have to pay interest generated from interest. Using compound interest unwisely is how many people get into trouble financially and drown in debt.

Compound Interest vs. Simple Interest

Simple interest is when interest is earned or charged based only on the principal amount, whereas compound interest earns and charges interest based on both the principal and interest.

Simple interest is calculated annually and compound interest is calculated based on the compounding period.

Mortgages and most loans such as auto loans, and personal loans use simple interest.

Simple interest benefits borrowers because they pay less interest. Investors favor compound interest because they earn more.

Compound Interest FAQ

Following are a few of the most common questions people asked about compound interest.

What are some types of investments with compound interest?

Certificates of Deposit (CDs)
Money Market Accounts
Dividend Stocks
Retirement Accounts

What is a compound period?

A compound period is a way to calculate when the interest gets compounded.

For example, annual compounding means the interest is compounded only once a year. When a compound occurs, interest is added to the investment or loan. Following are the different compounding periods.

Annually - interest is compounded every year

Semi-annually - interest is compounded once every half year

Quarterly - interest is compounded every quarter

Monthly - interest is compounded every month

Semi-monthly - interest is compounded every half month

Biweekly - interest is compounded every two weeks

Weekly - interest is compounded every week

Daily - interest is compounded every day

Does mortgage use compound interest?

No, mortgages use simple interest which is good for the borrower.

Do credit cards use compound interest?

Yes - most credit card companies use compound interest and interest compounds daily. This is bad news for borrowers who carry a high credit card balance as the debt will compound until they pay off their balance.

Are auto loans compound interest?

Auto loans use simple interest, they do not use compound interest. Lenders do not charge interest based on the interest owed. Most car loans have fixed interest rates, so the monthly payments stay the same through the course of the loan.

Is student loan compound interest?

Federal student loans use simple interest and most student loans from private lenders are also simple interest which is good for the students as they will pay less interest compared to compound interest.

Are personal loans compound interest?

Most personal loans are calculated using simple interest, but some lenders use compound interest. Check and compare lenders if you need to get a personal loan. Find one that uses simple interest with the lowest interest rate.