See how your money grows over time with compound interest, regular contributions, and different compounding frequencies.
How Compound Interest Works
Compound interest means you earn interest on your interest. The more frequently it compounds, the faster your money grows. With regular contributions, the effect accelerates dramatically over time.
FV = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]
P = Initial principal, r = annual rate, n = compounds per year
t = years, PMT = contribution per period
Frequently Asked Questions
Compound interest is interest calculated on both the initial principal and all previously accumulated interest. Unlike simple interest (calculated only on the principal), compound interest grows exponentially. A $10,000 investment at 7% compounded annually grows to $19,672 in 10 years vs. $17,000 with simple interest.
More frequent compounding means slightly higher returns. $10,000 at 7% for 10 years: annual compounding = $19,672, monthly = $20,097, daily = $20,138. The difference is small for normal rates but matters more at higher rates or longer time periods.
Divide 72 by your interest rate to estimate how many years it takes to double your money. At 7%, money doubles in about 10.3 years (72/7). At 10%, about 7.2 years. It's a quick mental math shortcut.
Regular contributions dramatically accelerate compound growth. $10,000 at 7% for 30 years grows to $76,123. Add $200/month and it becomes $317,229. The contributions themselves total only $82,000 — the rest is compound interest.
Starting 10 years earlier can more than double your final balance, even with the same contributions. The most powerful variable in compound interest is time.