See exactly how your investment grows over time with the power of compounding. Add regular contributions to see long-term wealth building in action.
Compound interest is what Albert Einstein reportedly called "the eighth wonder of the world." Whether or not he said it, the math is remarkable — your investment earnings generate their own earnings, and over time the growth becomes exponential. This calculator shows exactly how powerful compounding is for any investment amount, contribution schedule, and time horizon you choose.
— Results
The key difference between simple and compound interest is what your interest earns. With simple interest, you earn a fixed amount on your original principal only. With compound interest, you earn interest on your principal and on the interest already accumulated. Over long periods, this difference is enormous.
$10,000 at 7% simple interest for 30 years = $31,000.
$10,000 at 7% compound interest (annual) for 30 years = $76,123.
With monthly compounding, it grows to $81,165. Same money, same rate — the compounding frequency alone adds nearly $5,000.
A quick mental math trick every investor should know: divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 6%, your money doubles every 12 years. At 8%, every 9 years. At 12%, every 6 years. This helps you quickly compare investment options without a calculator.
The more frequently interest compounds, the faster your money grows. Monthly compounding outperforms annual compounding because you're earning interest on a growing balance more frequently throughout the year. The difference is small on short timeframes but adds up to thousands of dollars over decades.
APR (Annual Percentage Rate) is the stated interest rate without accounting for compounding. APY (Annual Percentage Yield) includes the effect of compounding and reflects what you actually earn in a year. For savings accounts and investments, APY is the more accurate number to compare. A 7% APR compounded monthly produces an APY of about 7.23%.
High-yield savings accounts and money market accounts offer compound interest on cash with low risk. Index funds and ETFs compound through price appreciation and dividend reinvestment. Retirement accounts like 401(k)s and Roth IRAs are among the best vehicles because they allow compounding to happen without annual tax drag.
Yes — and this is why high-interest debt is so damaging. Credit card interest compounds daily at rates of 20–29% APR. The same force that builds wealth through investing works against you when you carry a balance. Eliminating high-interest debt is mathematically equivalent to earning a guaranteed return equal to your interest rate.