Compound Interest Calculator

Compound interest is interest earned on both the original principal and previously accumulated interest. Unlike simple interest (calculated only on the principal), compound interest creates exponential growth. Albert Einstein reportedly called it the eighth wonder of the world.

At 7% annual return compounded monthly, $10,000 grows to about $40,387 in 20 years with no additional contributions. Add $300/month and it grows to approximately $196,000. The contributions total $82,000, but compound interest adds another $114,000.

Use 7% for a conservative, inflation-adjusted stock market return. Use 10% for nominal (before inflation) returns. For bonds, use 4%–5%. For savings accounts, use 4%–5% currently. Your actual rate depends on your investment mix.

Because of exponential growth, the earliest dollars contribute the most. Investing $300/month from age 25 to 65 at 7% yields about $745,000. Starting at 35 yields only $365,000 — less than half, even though you only contributed $36,000 less.

Yes. Compound interest on debt means you pay interest on interest. Credit cards compound daily at 20%+ APR, which is why balances grow rapidly. This is why paying off high-interest debt is often the best "investment" you can make.