What Is Compound Interest? Formula and Examples
Published 2026-11-02
Compound interest is interest calculated on the original principal plus interest already credited. Simple interest is only on the original principal. The gap looks small in year one and large in year twenty.
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Run these formulas with your own numbers. Math stays in your browser.
Open Compound Interest Calculator →Our compound interest calculator grows a starting amount with optional monthly deposits and a compounding frequency. The interest calculator is the simple-interest counterpart. The investment calculator is the same growth engine framed as investing.
Open the compound interest calculator
Enter starting amount, annual rate, years, compounding frequency and an optional monthly deposit. You will see future value, interest earned and a yearly table.
The standard formula
Without deposits, future value is P × (1 + R/k)^(k t). With monthly deposits, the calculator converts the compounding convention to an equivalent monthly rate and adds each contribution at month-end.
A = P × (1 + R/k)^(k t)
i = (1 + R/k)^(k/12) − 1; then ordinary annuity FV
Worked numbers
$1,000 at a nominal 12% compounded monthly for one year with $100 deposited each month-end grows to $2,395.08 in this engine — the same identity the investment calculator uses. Without deposits, that $1,000 at 12% monthly is about $1,126.83 in a year. The deposits are most of the ending balance; compounding is the rest. That is why a “compound interest calculator” with a monthly contribution looks more like a savings plan than a lump-sum lecture.
$10,000 at 7% for 10 years with no deposits is about $19,672 compounded annually and about $20,096 compounded monthly. Frequency matters, but rate and time matter more.
| Compounding | About |
|---|---|
| Annual | $19,672 |
| Monthly | $20,096 |
| Daily (365) | $20,137 |
Simple vs compound
Simple interest on $1,000 at 5% for 2 years is $100 (the interest calculator). Compound interest credits the first year’s interest so the second year earns a little more. Banks, credit cards and investments each post on their own calendar — this page is the textbook model, not a statement. “Compound interest calculator” is the search when someone wants the future value, not the definition. Use the compound interest calculator for the table; use the inflation calculator if you want those future dollars in today’s purchasing power.
- Enter the starting principal.
- Enter the nominal annual rate.
- Enter years and how often interest compounds (1, 2, 4, 12 or 365).
- Enter 0 for deposits if you only want a lump sum.
- Compare the yearly table with a lower rate to see fee drag.
Use the free tool
Run these formulas with your own numbers. Math stays in your browser.
Open Compound Interest Calculator →Frequently Asked Questions
Is the rate an APY?
You enter a nominal annual rate. Compounding frequency changes the effective yield.
Can I withdraw?
This tool only accumulates. It does not model withdrawals.
Why doesn’t my bank match?
Banks may use 365/360 day counts or credit on a statement cycle. Use their APY disclosure for the product.
How do fees change this?
A 1% annual fee on a 7% assumption is a much smaller net rate over decades. Enter a net return if you want that in the sketch.
Is this investment advice?
No. Markets do not compound at a flat advertised rate.
Related calculators
Compound Interest Calculator
Growth of savings with compounding and monthly contributions.
Interest Calculator
Simple interest earned or owed over time.
Investment Calculator
Future value of a starting amount plus monthly contributions.
Inflation Calculator
Future cost and lost purchasing power at a constant rate.