What is compound interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (which only applies to the principal), compound interest grows exponentially — it's what Einstein reportedly called "the eighth wonder of the world."

What is the compound interest formula?

A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of times interest compounds per year, and t is the number of years.

How often does interest compound?

It depends on the account or investment. Savings accounts often compound daily or monthly. Bonds may compound semi-annually. Investment returns are typically modeled annually. More frequent compounding leads to slightly higher returns.

What is the Rule of 72?

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. For example, at 8% annual return, your money doubles in approximately 72 ÷ 8 = 9 years.

What is a realistic annual return for investments?

Historically, the S&P 500 has returned approximately 10% annually (7% after inflation). High-yield savings accounts currently offer 4–5%. CDs offer 4–5.5%. Crypto assets have higher potential returns but much higher volatility.

Compound Interest Calculator

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Compound Interest — FAQ

About the Compound Interest Calculator

The CalcFi compound interest calculator shows you exactly how investments grow over time using the power of compounding. Whether you're planning for retirement, saving for a down payment, or building long-term wealth, this tool reveals the true potential of consistent investing.

Enter your starting investment, the expected annual return, how many years you plan to invest, and how often interest compounds. The calculator shows your final balance, total interest earned, and displays a clear growth chart so you can visualize your wealth building over time.

Example: $10,000 invested at 7% annual return, compounded monthly for 30 years, grows to $81,165. That's $71,165 in interest on a $10,000 investment — the power of compound interest working over three decades.

This calculator is ideal for modeling retirement savings, comparing savings accounts with different compounding frequencies, or simply understanding why starting to invest early makes such a dramatic difference. A 25-year-old investing $10,000 ends up with far more at 65 than a 35-year-old investing the same amount.

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