Compound Interest Calculator
Calculate compound interest and investment growth
How to use Compound Interest Calculator
Calculate compound interest and see how your investment grows over time. Supports monthly and yearly compounding. Free tool.
Why is compound interest called the eighth wonder of the world?
Compound interest generates returns on previous returns — the snowball effect that makes long-term investing so powerful. Einstein is often (apocryphally) credited with calling it the eighth wonder of the world. Understanding it is fundamental to personal finance.
- Savings accounts and ISAs: Calculate how much a regular savings plan grows over time with compounding. A €10,000 investment at 7% annual return doubles in approximately 10 years (the Rule of 72).
- Retirement planning: Model how much to save monthly to reach a retirement target. Starting at 25 vs 35 has a dramatic difference due to 10 extra years of compounding.
- Debt cost: Credit card debt compounds against you — a €5,000 balance at 20% APR compounded monthly costs €1,000+ per year in interest alone.
- Investment comparison: Compare different investment options with different compounding frequencies (daily, monthly, annually) to find the effective annual rate.
- Education funding: Calculate how much to invest today to fund a child's university education in 18 years.
Rule of 72: Divide 72 by the annual interest rate to approximate the years to double your money. At 6% annual return: 72/6 = 12 years to double. At 9%: 72/9 = 8 years.
Frequently Asked Questions
What is the difference between compound and simple interest?
Simple interest is calculated only on the principal: interest = principal × rate × time. Compound interest is calculated on the principal plus accumulated interest — interest earns interest. Over long periods, the difference is enormous: €10,000 at 6% for 30 years = €18,000 (simple) vs €57,435 (compound annually).
How does compounding frequency affect returns?
More frequent compounding gives slightly higher returns. €10,000 at 10% for 1 year: annual compounding = €11,000; monthly = €11,047; daily = €11,052. The differences are small for one year but accumulate over decades. The effective annual rate (EAR) accounts for compounding frequency.
What is APR vs APY?
APR (Annual Percentage Rate) is the nominal rate without compounding. APY (Annual Percentage Yield) — also called EAR — includes the effect of compounding. A savings account advertised at 5% APR compounded monthly has an APY of 5.12%. APY is the number that matters for comparing returns.
How do I calculate the future value of regular monthly deposits?
This is the future value of an annuity formula. Most compound interest calculators — including this one — support regular contributions. Add a monthly deposit amount to see the dramatic effect of consistent saving combined with compound growth.
What is the impact of inflation on compound growth?
Inflation erodes real returns. If your investment returns 7% annually but inflation is 3%, your real return is approximately 4%. Always consider inflation when projecting long-term investment outcomes — use the real rate of return (nominal rate minus inflation) for purchasing power comparisons.
Compound interest calculator vs investment return calculator vs mortgage calculator
A compound interest calculator models exponential growth of a lump sum with optional regular contributions — ideal for savings and investments. A mortgage calculator models amortization — how each payment reduces the principal balance, with interest charged on the declining balance. A loan calculator is similar to a mortgage but for personal loans. An IRR calculator (Internal Rate of Return) works backwards to find the implied rate of return given cash flows — used in business valuation. Each tool suits a different financial planning need.