Calculate Interest
Calculate how your money grows with simple or compound interest. See year-by-year breakdowns and understand how different compounding frequencies affect your returns.
Simple Interest
Formula: Interest = Principal × Rate × Time
Simple interest is straightforward—you earn the same amount of interest each year based only on your initial investment.
Compound Interest
Formula: A = P(1 + r/n)^(nt)
Where A = final amount, P = principal, r = annual rate, n = compounding frequency, t = time in years. Compound interest grows faster because you earn interest on your interest.
The Power of Compound Interest
Albert Einstein allegedly called compound interest "the eighth wonder of the world." Over long periods, the difference between simple and compound interest becomes enormous.
Example: $10,000 at 7% for 30 years
- Simple Interest: $10,000 + ($10,000 × 0.07 × 30) = $31,000
- Compound (Annual): $10,000 × (1.07)^30 = $76,123
- Compound (Monthly): $10,000 × (1 + 0.07/12)^360 = $81,165
Tips for Investors
- Start investing early—time is your greatest ally with compound interest
- Compare APY, not APR, when choosing savings accounts
- Reinvest dividends to maximize compounding
- Be patient—the magic of compounding becomes more powerful over longer periods