Compound interest calculator
Watch how a single starting balance grows when interest is credited on a fixed schedule. Enter principal, a yearly rate, time in years, and how often compounding happens—the tool reports future balance, total interest, and an effective annual growth figure for comparison.
Your inputs
Result
Future balance
$0.00
- Interest earned
- —
- Effective annual growth (approx.)
- —
Effective annual growth is derived from ending balance ÷ principal over the years you entered; it is not a bank’s quoted APY, which may use different day-count rules.
Why compounding matters in plain language
Compound interest means you earn returns not only on the original principal but also on interest that has already been credited and left in the account. Each time the institution posts interest, the balance is a little larger, so the next interest calculation starts from a higher base. Over long horizons that mechanical repetition is powerful: small differences in rate or in how often interest is credited can swing the ending balance by meaningful amounts, which is why disclosures emphasize both nominal rates and annual percentage yield where regulations require it.
The closed form implemented on this page, A = P(1 + r/n)^(nt), assumes a constant nominal annual rate, a fixed compounding frequency, no withdrawals, no new deposits, and no fees. In that ideal world the exponent keeps track of how many times the balance has been multiplied by one period’s factor. When you switch from annual to monthly compounding while holding the nominal rate constant, you increase n, so each period’s rate r/n is smaller but you apply it more often; the net effect is a slightly higher ending balance, which shows up in the effective annual growth line in the results panel.
Where people use a lump-sum compound model
Savers use it to sanity-check marketing examples for CDs or high-yield savings when they want a ballpark of “if I park this much and the credited rate holds, what might I see?” Debt scenarios sometimes run the same mathematics in reverse awareness: revolving balances also compound in their own way, which is why minimum-payment strategies can be expensive even when the stated APR looks moderate. Educators like the formula because it connects exponential functions to a concrete dollar story. None of those use cases replace reading your actual contract, tax treatment, or risk disclosures—but they do sharpen intuition before you open a spreadsheet or talk to a planner.
Frequently asked questions
- What formula does this compound interest calculator use?
- It uses the standard lump-sum compound growth formula A = P(1 + r/n)^(nt), where P is principal, r is the nominal annual rate as a decimal, n is the number of compounding periods per year, and t is time in years. Interest earned is A minus P.
- What is the difference between nominal rate and effective annual rate?
- The nominal rate is the stated annual percentage before considering how often interest is credited. The effective annual rate is the actual one-year growth factor you would realize after compounding; more frequent compounding increases the effective rate when the nominal rate is held constant.
- Does this include taxes, fees, or inflation?
- No. The numbers are a pure math model of compounding on one starting balance. Real accounts may charge fees, withhold taxes on interest, or lose purchasing power to inflation, none of which are modeled here.
- Can I model monthly contributions with this page?
- This version is for a single starting deposit only. Regular contributions change the cash-flow pattern and need an annuity or spreadsheet-style schedule. Use it when you want a clean read on what one principal does over time at a fixed credited rate.
- Which compounding option should I pick for a savings account?
- Choose the frequency that matches how the institution credits interest to the account, such as monthly or daily. If you are unsure, monthly is a common default for many consumer savings products, but your statement or disclosure is the authoritative source.