Compound Interest Calculator

Compound interest is interest calculated on the initial principal of a deposit or loan, plus all accumulated interest from prior periods. Essentially, you earn interest on your interest, creating an exponential growth curve over time.

Simple interest is calculated solely on the original principal amount. Compound interest accumulates interest on the principal as well as the interest generated in previous periods. Over long periods, compounding will generate significantly larger sums than simple interest.

The compounding frequency dictates how often interest is calculated and added to the principal balance. More frequent compounding (e.g., daily or monthly) allows interest to be reinvested faster, generating higher ultimate yields compared to less frequent compounding (e.g., annually).

The Rule of 72 is a quick estimation mental model to determine how many years it will take to double your investment capital. By dividing 72 by the annual interest rate, you get the approximate double time (e.g., at a 10% rate, your money doubles in about 7.2 years).

Periodic additions (such as monthly or yearly contributions) inject fresh principal continuously into the compounding engine. The new deposits immediately start gaining interest alongside the existing pool, compounding overall returns much faster than static initial amounts.

Interest generated is typically treated as taxable income in the year it's credited, unless the funds are locked inside tax-sheltered accounts like IRAs, PPF, or 401(k) plans. Consult your financial planner or local tax codes to review specific compliance guidelines.