Compound interest calculator
What difference does compound interest make?
Enter your starting amount, term and interest rate. The calculator shows what compounding turns it into, and what you'd have if the interest were paid out every year. The difference is the interest on interest.
Examples:$1,000 once$10,000 once$50,000 once
Increase in the monthly amount and inflation
Converts the result into today's purchasing power.
Capital at the end of each year
- paid in
- interest
- interest on interest
What the calculation uses
This is a calculator with your assumptions, not a forecast, not a price target and not a recommendation. The interest rate is assumed to be the same over the whole term; tax and costs are not deducted.
How it is calculated
- With compounding: final amount = starting amount × (1 + rate) to the power of the number of years.
- Without compounding: final amount = starting amount × (1 + rate × years). The interest is paid out and earns nothing itself.
- Interest on interest is the difference between the two.
- Monthly amounts are compounded month by month at the effective monthly rate, the twelfth root of 1 plus the rate. Without compounding, each payment earns the rate times the time it stays invested.
- Today's purchasing power is the final amount divided by 1 plus inflation to the power of the number of years.
Assumptions and notes
- The rate is the same over the whole term. Savings account rates change with central bank rates, and stock returns vary from year to year.
- Tax and costs are not deducted. Interest on a bank account is taxed every year above the saver's allowance, which also slows down compounding.
- “Without compounding” means the interest is paid out and not reinvested. Each payment then only earns rate times time.
- There is no interest on interest yet in the first year, because a year's interest only earns interest itself from the following year. With monthly amounts, the result without compounding would even be a few cents higher in the first year; the calculator shows 0 there.
What $10,000 grows to
Invested once, before tax and costs. Below each figure is what it would be with simple interest, i.e. without compounding.
| Interest per year | after 10 years | after 20 years | after 30 years |
|---|---|---|---|
| 3% | $13,439with simple interest $13,000 | $18,061with simple interest $16,000 | $24,273with simple interest $19,000 |
| 5% | $16,289with simple interest $15,000 | $26,533with simple interest $20,000 | $43,219with simple interest $25,000 |
| 7% | $19,672with simple interest $17,000 | $38,697with simple interest $24,000 | $76,123with simple interest $31,000 |
Frequently asked questions
What is compound interest?
Compound interest means the interest earns interest too: the interest from the first year earns interest itself in the second year. At 5% a year, $10,000 grows to $43,219 after 30 years. If the interest were paid out every year instead of reinvested, it would be $25,000, so compounding adds $18,219.
How do you calculate compound interest?
Final amount = starting amount × (1 + rate) to the power of the number of years. For $10,000 at 5% over 30 years that is $10,000 × 1.05³⁰ = $43,219. Without compounding it is starting amount × (1 + rate × years), here $10,000 × 2.5 = $25,000. With monthly amounts, the calculator works through each month separately.
How long does it take for money to double?
A rule of thumb is the rule of 72: 72 divided by the interest rate in percent gives roughly the years until your money doubles. At 5% that is 14.4 years, exactly 14.2 years.
Is interest compounded monthly or yearly?
The calculator compounds monthly, but at the effective monthly rate, the twelfth root of 1 plus the annual rate. That way the year ends up with exactly the rate you enter. If a bank quotes a nominal rate and credits interest monthly, the effective annual rate is slightly higher: 5% nominal becomes 5.12%.
Is tax deducted?
No. Interest on a bank account is taxed every year above the saver's allowance, which also slows down compounding. For an ETF savings plan with tax, use the savings plan calculator.
When does compounding start to make a difference?
In the first year there is no interest yet that could earn interest. After that, compounding grows faster and faster: with $10,000 at 5% it adds $1,289 after 10 years, $6,533 after 20 years and $18,219 after 30 years. That is why time matters most with compound interest.