Plan your investments and watch your money grow over time.
See how your investment grows over time with compound interest
$34,000
$13,293
$47,293
39.10%
Total return relative to investment16.81%
Annualized rate of return4.7×
Multiple of initial investment28.11%
Proportion from investment growth14.4 years
Years to 2x initial investment47.2 years
Years to 10x initial investment| Year | Starting Balance | Contributions | Interest Earned | Ending Balance |
|---|---|---|---|---|
| Year 1 | $10,000 | $2,400 | $565 | $12,965 |
| Year 2 | $12,965 | $2,400 | $713 | $16,078 |
| Year 3 | $16,078 | $2,400 | $869 | $19,347 |
| Year 4 | $19,347 | $2,400 | $1,032 | $22,780 |
| Year 5 | $22,780 | $2,400 | $1,204 | $26,383 |
| Year 6 | $26,383 | $2,400 | $1,384 | $30,168 |
| Year 7 | $30,168 | $2,400 | $1,573 | $34,141 |
| Year 8 | $34,141 | $2,400 | $1,772 | $38,313 |
| Year 9 | $38,313 | $2,400 | $1,981 | $42,694 |
| Year 10 | $42,694 | $2,400 | $2,200 | $47,293 |
The eighth wonder of the world that can transform your financial future
Compound interest is interest on interest - when your earned interest is added to your principal, so that future interest is earned on the combined amount.
Unlike simple interest (which is only calculated on the original principal), compound interest accelerates your wealth growth over time by continuously adding interest earnings to your investment base.
"Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it."
— Albert Einstein
A = P(1 + r/n)nt
With periodic contributions, the formula becomes more complex. That's why a calculator like the one above is so valuable - it handles all the mathematical complexity for you!
The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest.
Notice how the growth accelerates over time. The increase from years 30-40 is nearly equal to all previous growth combined!
In the first decade, you only gain about $9,600. But by holding for 40 years, you've earned nearly $140,000 in interest - 14 times your initial investment.
A lower return over a longer period often outperforms a higher return over a shorter period. Consistency and time are your biggest allies.
Sarah invested for just 10 years but ended up with more money than Michael who invested for 30 years!
This demonstrates why starting early is one of the most powerful financial strategies.
| Simple Interest | Compound Interest | |
|---|---|---|
| Interest Calculated On | Original principal only | Principal + accumulated interest |
| Growth Pattern | Linear (steady) | Exponential (accelerating) |
| Example | $1,000 at 5% for 10 years = $1,500 | $1,000 at 5% for 10 years = $1,629 |
| Common Uses | Some loans, bonds | Savings accounts, investments |
| Long-term Impact | Modest | Potentially dramatic |
Retirement accounts, pension schemes, and superannuation funds rely on compound interest to grow your savings over decades. Even small regular contributions can grow substantially by retirement age.
Education investment accounts and dedicated savings plans use compound growth to help parents save for their children's future educational needs, from primary school to university.
Unfortunately, compound interest works against you with debt. Mortgage payments are structured to pay interest first, which is why early payments have less impact on the principal.
Credit cards often compound interest daily at high rates (often 15-25%). This is why credit card debt can spiral out of control so quickly.
It varies by financial product. Savings accounts typically compound daily or monthly. Investment accounts often compound quarterly or annually. CDs may compound daily, monthly, or at maturity.
Yes. Inflation reduces the purchasing power of money over time. To account for this, investors should look at the "real return rate" (nominal interest rate minus inflation rate). Our calculator includes an inflation adjustment option.
Compound interest creates an exponential growth curve. In early years, the interest-on-interest effect is small because the accumulated interest is small. As your balance grows, the compounding effect becomes more powerful.
Time is generally the most powerful factor, which is why starting early is so important. That said, all three elements matter significantly. Using our calculator, you can experiment with different combinations to see their relative impact.