What is compound interest?

Compound interest is interest calculated on the initial principal plus all accumulated interest from previous periods. It's often described as "interest on interest" and is the key driver of long-term investment growth.

How often should interest compound?

More frequent compounding produces slightly higher returns. Most savings accounts compound daily, bonds often semi-annually, and investment returns are commonly quoted as annually for simplicity. The difference between daily and annually compounding at the same rate is small — usually a few percent over decades.

Does this account for inflation or taxes?

No. This calculator shows nominal growth only. Real (inflation-adjusted) returns are typically 2–3% lower per year. Taxes on interest, dividends, and capital gains reduce returns further depending on your account type and jurisdiction.

Is this financial advice?

No. This is an educational tool for projecting hypothetical growth. Actual investment returns vary, can be negative, and past performance does not guarantee future results. Consult a qualified financial advisor for personal decisions.

Compound Interest Calculator

Project investment growth with compound interest and regular contributions

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Initial principal

Regular contribution

Contribution frequency

Annual rate7%

Years20

Compounding

Future value

$144,572.72

Total contributions

$58,000.00

Total interest earned

$86,572.72

Estimates only. Returns are nominal (before inflation and tax). Not financial advice.

Frequently Asked Questions

What is compound interest?

Compound interest is interest calculated on the initial principal plus all accumulated interest from previous periods. It's often described as "interest on interest" and is the key driver of long-term investment growth.
How often should interest compound?

More frequent compounding produces slightly higher returns. Most savings accounts compound daily, bonds often semi-annually, and investment returns are commonly quoted as annually for simplicity. The difference between daily and annually compounding at the same rate is small — usually a few percent over decades.
Does this account for inflation or taxes?

No. This calculator shows nominal growth only. Real (inflation-adjusted) returns are typically 2–3% lower per year. Taxes on interest, dividends, and capital gains reduce returns further depending on your account type and jurisdiction.
Is this financial advice?

No. This is an educational tool for projecting hypothetical growth. Actual investment returns vary, can be negative, and past performance does not guarantee future results. Consult a qualified financial advisor for personal decisions.