Compound Interest Calculator
Compound interest is the interest calculated on the initial principal and also on the accumulated interest from previous periods. Often called "interest on interest," it is one of the most powerful concepts in finance, allowing your money to grow exponentially over time rather than linearly.
Understanding compound interest is essential for making informed decisions about savings, investments, and loans. The frequency of compounding — whether daily, monthly, quarterly, or annually — directly affects how quickly your money grows. Even small differences in interest rates or compounding periods can lead to significant differences over long time horizons.
How it works
A = P × (1 + r/n)^(n×t), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the time in years.
Use cases
- Planning long-term savings and retirement accounts
- Comparing investment options with different compounding frequencies
- Understanding the true cost of loans and credit card debt
- Projecting future value of regular monthly contributions