Compound Interest Calculator

How Does Compound Interest Work?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest — which applies only to the principal — compound interest causes your balance to grow exponentially over time. The more frequently interest compounds (daily vs. annually), the faster your money grows. Starting early and making regular contributions dramatically amplifies results thanks to the time component in the formula. Even small monthly additions can lead to significant wealth accumulation over decades. This principle is the foundation of retirement savings accounts, index funds, and long-term investing strategies.