What compound interest is
What this calculator does
You enter a starting amount, an annual rate, a term and how often interest is added. The calculator shows what you end up with, how much of it you paid in and how much interest added. You can add a monthly top-up.
Simple and compound interest
Simple interest is charged only on the starting amount. Compound interest is charged on the amount plus the interest already earned. 10,000 at 10% a year for 10 years gives 20,000 with simple interest and 25,937.42 with compound interest added once a year.
Compounding
Compounding is when interest is added to the deposit and then earns interest itself. The more often, the more you get: 12% compounded monthly gives 12.68% over a year. The calculator shows that figure as the effective rate.
Top-ups
A top-up is paid in at the end of each month and starts growing at the same rate right away. For yearly or quarterly compounding the calculator uses the equivalent monthly rate. A bank may treat payments inside a period differently – only it can give the exact sum under its contract.
The formula
For the starting amount: S = P · (1 + r/n)^(n·t), where P is the amount, r the annual rate, n how many times a year interest compounds, t the years. Top-ups are added as an annuity at the equivalent monthly rate.
Tax and inflation
The calculator does not subtract tax: every country has its own rate, and it is usually withheld from deposit interest. It ignores inflation too – it shows the nominal sum, not what it will buy.
Limits
Amounts up to a billion, a rate up to 100% a year, the term in whole years from 1 to 100. If the result goes past a quadrillion, the calculator asks you to lower the rate or the term.
Common questions about compound interest
How fast will a deposit double?
In roughly 72 divided by the rate, in years – the "rule of 72". At 8% a year the sum doubles in about 9 years. The calculator gives the exact figure: enter a term and see when the total passes twice the amount.
Which is better: monthly or yearly compounding?
At the same rate, monthly is slightly better: interest starts working sooner. The difference shows in the "Effective rate" row.
Can I calculate a deposit with no starting amount?
Yes. Put 0 as the starting amount and enter a monthly top-up – the calculator shows how much builds up from payments alone.
Why is the bank's sum different?
Because of tax the bank withholds, its rules for interest inside a month and the number of days in a year. The calculator shows the maths without tax and without one bank's rules.
Does it work for a loan?
No. A loan is usually paid off in monthly payments, and that needs a different formula. This calculator is for a deposit that grows.