Understanding Compound Interest
Compound interest is interest calculated on both your original deposit and the interest that deposit has already earned. Over long periods, that "interest on interest" effect is what turns modest, regular savings into meaningful wealth.
The compound interest formula
The standard formula is A = P(1 + r/n)^(nt), where P is your principal, r is the annual interest rate, n is how many times per year interest compounds, and t is the number of years. Our compound interest calculator runs this formula for you and shows a year-by-year breakdown.
Why time matters more than rate
Because growth compounds, money invested a decade earlier at a modest rate often outperforms money invested later at a higher rate. Two people saving the same monthly amount can end up with very different balances purely because one started sooner — this is the single biggest lever most savers have.
Compounding frequency
Interest can compound annually, monthly, or even daily. More frequent compounding produces slightly higher returns for the same nominal rate, which is why the calculator lets you choose a compounding frequency instead of assuming one.