Compound Interest Calculator
See how a one-time deposit grows when interest compounds daily, monthly, quarterly, or annually.
What Is Compound Interest?
Compound interest is interest calculated not just on your original principal, but also on the interest that principal has already earned. This is different from simple interest, which is always calculated only on the original amount. Because compound interest keeps adding to the base it's calculated on, growth accelerates the longer money is left to grow — a pattern often described as "interest earning interest."
The formula this calculator uses is A = P(1 + r/n)nt, where P is your principal, r is the annual interest rate, n is the number of times interest compounds per year, and t is the number of years. This is the same formula used in textbooks, bank disclosures, and most financial planning software.
How Compounding Frequency Changes Your Return
For the same principal and the same stated annual rate, more frequent compounding produces a slightly higher final amount, because interest is added to the balance — and starts earning its own interest — sooner. Daily compounding will out-earn monthly compounding, which in turn out-earns quarterly and annual compounding, though the differences are often smaller than people expect, especially over shorter time periods.
Where compounding frequency matters most is over very long time horizons — fifteen, twenty, or thirty years — where even small percentage-point differences compound into meaningfully different outcomes. Use the frequency dropdown above to compare daily versus annual compounding on the same principal and see the gap for yourself.
Compound Interest vs. Simple Interest
Simple interest only ever applies to your original principal, so growth is linear — a straight line on a chart. Compound interest applies to a constantly growing balance, so growth curves upward over time. Over short periods the difference between the two is small, but over long periods it becomes dramatic. This is why virtually every long-term savings, retirement, and investment account uses compound interest as its default growth model.
Frequently Asked Questions
What compounding frequency should I choose?
Use whatever frequency your actual bank or investment account states in its terms — this is usually disclosed as part of the account's Annual Percentage Yield (APY) documentation.
Does this calculator include monthly contributions?
No — this tool models a single lump-sum principal. If you're adding money every month, use our Savings Calculator instead.
Why does daily compounding barely beat monthly compounding?
At typical savings account interest rates, the mathematical gap between daily and monthly compounding is small — often just a few dollars per thousand per year — because the rate itself, not the frequency, is the dominant factor in your return.