📈 Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (which is only calculated on the principal), compounding allows your interest to earn interest, accelerating growth over time.

More frequent compounding leads to slightly higher returns. Daily compounding produces more than monthly, which produces more than annual. However, the difference between daily and monthly compounding is relatively small compared to the impact of the interest rate itself.

The Rule of 72 is a simple way to estimate how long it takes to double your money. Divide 72 by your annual interest rate. For example, at 8% annual return, your money doubles in approximately 72 ÷ 8 = 9 years.

Regular monthly contributions dramatically accelerate wealth building. Even small consistent contributions added to compounding interest can result in a much larger final balance than a single lump sum with no contributions. This is the foundation of dollar-cost averaging.

APR (Annual Percentage Rate) is the base interest rate without accounting for compounding. APY (Annual Percentage Yield) reflects the actual return after compounding is applied. APY is always equal to or greater than APR. When comparing savings accounts or investments, APY gives you the true annual return.