Compound Interest Calculator

Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus all previously accumulated interest — your earnings generate their own earnings. A $10,000 investment at 7% simple interest earns $700 every year. With annual compounding, it earns $700 in year one, $749 in year two, $801 in year three, and so on. After 30 years, the compound version is worth over $76,000 compared to $31,000 with simple interest.

The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by the annual interest rate: at 6%, your money doubles in about 12 years; at 8%, about 9 years; at 12%, about 6 years. This mental shortcut helps you set realistic expectations and compare investment options at a glance.

The more frequently interest compounds, the more you earn. Daily compounding yields slightly more than monthly, which yields more than quarterly, which yields more than annually. For savings accounts and CDs, look for daily compounding. The difference between annual and daily compounding on $10,000 at 5% over 10 years is about $130 — small individually, but meaningful across a lifetime of saving.