luckpandaHow to use the compound interest calculator
- Pick the currency and enter the starting amount.
- Enter the yearly interest rate and the number of years.
- Choose how often interest compounds, and add a monthly contribution if you have one.
- Read the final amount and open the year-by-year table.
Compound interest, worked through
With yearly compounding, each year’s interest is added to the balance and earns interest the next year. $10,000 at 8%: year 1 ends at $10,800, year 2 at $11,664, year 3 at $12,597.12, and year 10 at $21,589.25. Of that, $11,589.25 is interest, more than the starting amount.
An Indian bank fixed deposit of ₹1,00,000 at 7% compounded quarterly for 5 years grows to ₹1,41,477.82, an effective rate of 7.186% a year.
| Compounding | Periods a year | $10,000 at 8% after 10 years | Effective annual rate |
|---|---|---|---|
| Yearly | 1 | $21,589.25 | 8.000% |
| Half-yearly | 2 | $21,911.23 | 8.160% |
| Quarterly | 4 | $22,080.40 | 8.243% |
| Monthly | 12 | $22,196.40 | 8.300% |
| Daily | 365 | $22,253.46 | 8.328% |
Saving every month
Regular contributions usually matter more than the rate. $5,000 at 7% compounded monthly grows to about $20,194 in 20 years on its own. Adding $200 a month takes it to $124,379.03: $53,000 deposited and $71,379.03 of interest. Starting earlier matters most, because the first contributions compound the longest.
Compound vs simple interest
Simple interest is paid on the starting amount only. Compound interest is paid on the growing balance. $10,000 at 8% for 20 years earns $16,000 of simple interest, but $36,609.57 compounded yearly. Use the simple interest calculator to compare.