Compound Interest Calculator

Updated on 10-Dec-2025

Enter principal, annual rate, compounding frequency, time, and optional regular contributions to get future value, total interest earned, and a clear year-by-year breakdown.

Principal Amount ($):

Annual Interest Rate (%):

Time Period (Years):

Years

Compounding Frequency:

Additional Monthly Contribution ($):

Additional Yearly Contribution ($):

Results

Total Investment ($)

$23,000.00

Total Interest Earned ($)

$7,313.66

Future Value ($)

$30,313.66

Final Balance ($)

$30,313.66

Compound interest is one of the simplest ways to understand how your money grows over time. When interest is added on top of interest, your savings can grow faster than you expect. A Compound Interest Calculator helps you see exactly how your investment grows with different interest rates, compounding frequencies, and contributions.

Basic Compound Interest Formula (No Monthly or Yearly Deposits)

The simplest formula is used when the user is not adding extra money each month/year:

$A = P {(1 + \frac{r}{n})}^{n t}$

Total Interest Earned:

$Interest = A - P$

Compound Interest With Monthly Contributions (Ordinary Annuity)

If the user adds a fixed amount every month at the end of the month:

$A = P {(1 + \frac{r}{n})}^{n t} + P M T \times \frac{(1 + i)^{m} - 1}{i}$

Where:

$P M T$ = monthly contribution
$i = r / 12$ monthly interest rate
$m = 12 t$ = total months

Compound Interest With Yearly Contributions

$A = P {(1 + \frac{r}{n})}^{n t} + C \times \frac{(1 + r)^{t} - 1}{r}$

Where $C$ is yearly contribution.

Corrected Example (Verified)

Example – Monthly Contributions (Corrected)

Let’s calculate using:

Principal $P = 1000$
Annual rate $r = 0.05$
Monthly compounding $n = 12$
Time $t = 2$ years
Monthly contribution $P M T = 50$

Step 1: Monthly interest rate

$i = \frac{0.05}{12} = 0.0041666667$

Step 2: Future value of principal

$F V_{P} = 1000 (1 + i)^{24} = 1104.94$

Step 3: Future value of monthly contributions

$F V_{P M T} = 50 \times \frac{1.104940717 - 1}{0.0041666667} = 1259.29$

Step 4: Total future value

$A = 1104.94 + 1259.29 = 2364.23$

Step 5: Total invested

$1000 + (50 \times 24) = 2200$

Step 6: Total interest earned

$Interest = 2364.23 - 2200 = 164.23$

Summary of Example

Item	Value
Future Value	$2364.23
Total Invested	$2200.00
Total Interest Earned	$164.23

FAQs

FAQs About Compound Interest

1. What is compound interest?

Compound interest is interest earned on both your original money (principal) and the interest that was added over time.
In simple words: interest on interest, which helps your money grow faster.

2. How is compound interest different from simple interest?

Simple interest is calculated only on the principal.
Compound interest is calculated on the principal plus all interest earned earlier.

That’s why compound interest grows your money faster.

3. How often does compounding happen?

Compounding can happen at different frequencies, such as:

Annually (1 time per year)
Semiannually (2 times per year)
Quarterly (4 times per year)
Monthly (12 times per year)
Daily (365 times per year)

More frequent compounding = slightly higher growth.

4. What formula is used to calculate compound interest?

The basic formula is:

$A = P {(1 + \frac{r}{n})}^{n t}$

Where:

P = principal
r = annual interest rate
n = compounding frequency
t = time in years
A = future value

5. Does adding monthly or yearly contributions increase returns?

Yes! When you deposit money regularly, each deposit also earns interest.
Even small monthly contributions can boost your final balance significantly due to compounding.

6. What is the best compounding frequency?

Higher frequencies (daily or monthly) grow money faster, but the difference is usually small.
Most savings accounts use daily or monthly compounding.

7. How much does the interest rate affect compound interest?

A small increase in interest rate makes a huge difference over long periods.
For example, 5% vs 7% interest over 20 years can change your final amount dramatically.

8. Can compound interest work against me in loans?

Yes. When you borrow money, compounding means your debt can grow quickly if you don’t make payments.
This is especially true for credit cards and unpaid loans.