Compound Interest Calculator
Calculate how your money grows with daily, weekly, monthly, or annual compounding — including a first-30-days daily breakdown and EAR calculation.
Compound Interest Calculator
Calculator Settings
⚡ Daily compounding maximises your returns
Calculation Results
Compounding Settings
Daily Compounding
365× per year
Please fill in all required fields to see calculation results
Complete Guide to Compound Interest
What is Compound Interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Often described as "interest on interest", it causes wealth to grow at an exponentially faster rate than simple interest.
Albert Einstein reportedly called compound interest "the eighth wonder of the world". The longer you leave money compounding, the more dramatically it grows — particularly when compounding happens daily.
Compound Interest Formula
A = P × (1 + r/n)^(n×t)
Effective Annual Rate (EAR) = (1 + r/n)^n − 1
Where: A = Accrued amount | P = Principal | r = Annual rate (decimal) | n = Compounding periods per year | t = Time (years)
Simple Interest vs Compound Interest
Simple Interest
- • Calculated only on principal
- • Linear growth over time
- • Formula: I = P × r × t
- • Used in short-term loans
Compound Interest
- • Calculated on principal + earned interest
- • Exponential growth over time
- • Formula: A = P(1 + r/n)^(nt)
- • Used in savings, investments, DeFi
Why Daily Compounding Matters
Daily compounding means interest is calculated and added to your balance every single day. This means you start earning interest on yesterday's interest today — maximising your returns.
Example: At 10% annual rate on $10,000:
- • Annual compounding → $11,000 after 1 year
- • Monthly compounding → $11,047.13 after 1 year
- • Daily compounding → $11,051.56 after 1 year
Tips for Maximising Compound Interest
Tip 1: Start as early as possible — time is the most powerful variable in compound interest. Even small delays cost significantly.
Tip 2: Choose daily over annual compounding when available — it can add meaningfully to long-term returns at no extra cost.
Tip 3: Add regular deposits. Even small monthly contributions dramatically increase your final compounded balance.
Common Compound Interest Mistakes
❌ Confusing APY with APR
APY already accounts for compounding; APR does not. Always compare using APY for a fair comparison of investment returns.
❌ Withdrawing Earnings Early
Withdrawing interest before it can compound defeats the purpose. Reinvest to maintain exponential growth.
❌ Ignoring Fees
Platform fees and taxes reduce your effective return and can significantly erode long-term compound gains. Always factor them in.
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OpenFrequently Asked Questions
What is compound interest and how does it work?
Compound interest is interest earned on both the principal AND the accumulated interest from previous periods. Each period's interest gets added to the principal, so the next period's interest calculation uses a larger base. Over long horizons this produces exponential — not linear — growth.
What's the difference between APR, APY, and EAR?
APR (Annual Percentage Rate) is the stated annual rate without compounding. APY (Annual Percentage Yield) and EAR (Effective Annual Rate) are equivalent terms for the actual yearly rate INCLUDING compounding. APY > APR whenever compounding happens more than once a year. The calculator displays both so you see the impact directly.
How does compounding frequency affect total returns?
More frequent compounding produces a higher effective rate. Example: $10,000 at 10% APR over 1 year — annual: $11,000 (10% EAR), monthly: $11,047.13 (10.47% EAR), daily: $11,051.56 (10.52% EAR). The gap is small per year but compounds dramatically over decades.
What is the rule of 72?
A quick estimate: years to double your money ≈ 72 ÷ annual interest rate. So at 6% your money doubles in ~12 years; at 9% in ~8 years; at 12% in ~6 years. It's an approximation that works best for rates 4–15%. For exact doubling time use ln(2) ÷ ln(1+r). See our dedicated Rule of 72 Calculator for more precise results.
How does the calculator handle additional deposits?
Each recurring deposit (you can set monthly, quarterly, or annual) gets added to the principal at the start of its period and compounds for the remaining time. So earlier deposits compound for longer than later ones. The cumulative effect is captured in the future-value-of-an-annuity formula the calculator uses.
Is compound interest the same for savings accounts and investments?
The math is the same, but the rates differ wildly. Savings accounts offer 1–5% APY (FDIC-insured but barely beating inflation). Stock-index investments target 7–10% real returns long-term but with volatility. Real estate, bonds, and CDs sit in between. Use the calculator to model each.