Compound Interest Calculator

Simple interest is calculated only on the original principal, while compound interest is calculated on both the principal and the accumulated interest. Over long periods, compound interest leads to significantly higher returns.

The more frequently interest compounds, the higher the returns. Monthly compounding (n=12) generates more interest than annual compounding (n=1) at the same nominal rate, because interest is added to principal more often.

EAR is the actual annual return after accounting for compounding. It is always higher than the nominal rate when compounding frequency is more than once per year. EAR = (1 + r/n)^n − 1.

Start early, invest consistently, reinvest returns, choose higher compounding frequencies, and avoid premature withdrawals. Time is the most powerful variable in compounding — even a few extra years can dramatically multiply your wealth.