Compound Interest Calculator
Discover the eighth wonder of the world - compound interest
Last reviewed on April 28, 2026.
Calculate Your Investment Growth
Understanding Compound Interest
The Power of Compounding
Albert Einstein allegedly called compound interest "the eighth wonder of the world." Whether he said it or not, the power of compounding is undeniable.
Simple Interest: You earn interest only on your principal
Compound Interest: You earn interest on your principal AND previously earned interest
Example: $10,000 at 7% for 30 years
- Simple Interest: $31,000
- Compound Interest: $76,123
- Difference: $45,123!
The Rule of 72
Quick way to estimate doubling time:
72 ÷ Interest Rate = Years to Double
At 7% return: 72 ÷ 7 = ~10 years
Common Investment Scenarios
Frequently Asked Questions
Historical average returns (before inflation):
- S&P 500: ~10% annually (1957-2023)
- Bonds: ~5% annually
- Balanced Portfolio (60/40): ~7-8% annually
- High-Yield Savings: 4-5% (as of 2026)
Use conservative estimates for planning: 6-7% for stocks, 3-4% for bonds.
More frequent compounding = higher returns, but the difference is smaller than you might think:
$10,000 at 5% for 10 years:
- Annual: $16,288.95
- Monthly: $16,470.09 (+$181)
- Daily: $16,486.65 (+$198)
Most investment accounts compound daily, but the frequency matters less than the rate and time.
Research shows lump sum investing beats dollar-cost averaging (DCA) about 2/3 of the time. However:
- Lump sum: Best for maximizing returns if you have the money now
- DCA: Reduces volatility risk and provides psychological comfort
- Reality: Most people invest from paychecks, making DCA natural
The best strategy is the one you'll stick with consistently.
Tax-advantaged accounts protect compound growth:
- 401(k)/403(b): Tax-deferred growth, taxed on withdrawal
- Roth IRA: Tax-free growth and withdrawals
- Traditional IRA: Tax-deferred growth
- Taxable account: Annual taxes on dividends/gains
Prioritize tax-advantaged accounts for long-term compound growth.