What is compound interest?
Compound interest is interest that's earned not just on your original principal, but also on the interest that's already accumulated. Because interest keeps earning interest, your money grows faster and faster over time compared to simple interest (which only applies to the principal).
Formula
Final amount = principal Γ (1 + annual rate Γ· compounding frequency)compounding frequency Γ years
The shorter the compounding period (daily compounds slightly more than monthly, which compounds slightly more than annually), the larger the final amount β but that difference shrinks as the compounding frequency increases.
Frequently Asked Questions
Does this calculator account for taxes?
No, this calculator only computes pre-tax compound growth. Actual savings and investment products may have different after-tax returns depending on taxes and fees.
Can it account for additional monthly deposits?
This calculator only computes compound growth on a single initial deposit. If you need to model regular monthly contributions, look for a dedicated savings/contribution calculator.