Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (calculated only on principal), compound interest grows exponentially — meaning your interest earns interest.

More frequent compounding leads to slightly higher returns. Daily compounding yields more than monthly, which yields more than annually. For most investments, monthly compounding is standard. The difference between daily and monthly compounding is typically small (< 0.1% per year).

CAGR (Compound Annual Growth Rate) is the rate at which an investment would have grown if it grew at a steady rate annually. It is calculated as: CAGR = (Final Value / Initial Value)^(1/Years) - 1. It smooths out volatility and allows comparison between investments.

The Rule of 72 is a quick mental math trick: divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 6%, your money doubles in about 12 years. At 9%, about 8 years.

Historically, the US stock market (S&P 500) has returned approximately 10% annually before inflation, or roughly 7% after inflation. However, individual years vary widely. Past performance does not guarantee future results. Diversification and long time horizons reduce risk.