Compound Interest Calculator
Calculate compound interest to see how investments or loans grow over time. Ideal for savings, investments, and understanding the power of compounding.
Investment Details
Summary
3,869.68
2,869.68
Growth Chart
| Year | Interest | Total Interest | Balance |
|---|---|---|---|
| 1 | 70.00 | 70.00 | 1,070.00 |
| 2 | 74.90 | 144.90 | 1,144.90 |
| 3 | 80.14 | 225.04 | 1,225.04 |
| 4 | 85.75 | 310.80 | 1,310.80 |
| 5 | 91.76 | 402.55 | 1,402.55 |
| 6 | 98.18 | 500.73 | 1,500.73 |
| 7 | 105.05 | 605.78 | 1,605.78 |
| 8 | 112.40 | 718.19 | 1,718.19 |
| 9 | 120.27 | 838.46 | 1,838.46 |
| 10 | 128.69 | 967.15 | 1,967.15 |
| 11 | 137.70 | 1,104.85 | 2,104.85 |
| 12 | 147.34 | 1,252.19 | 2,252.19 |
| 13 | 157.65 | 1,409.85 | 2,409.85 |
| 14 | 168.69 | 1,578.53 | 2,578.53 |
| 15 | 180.50 | 1,759.03 | 2,759.03 |
| 16 | 193.13 | 1,952.16 | 2,952.16 |
| 17 | 206.65 | 2,158.82 | 3,158.82 |
| 18 | 221.12 | 2,379.93 | 3,379.93 |
| 19 | 236.60 | 2,616.53 | 3,616.53 |
| 20 | 253.16 | 2,869.68 | 3,869.68 |
Compound Interest Explained 📈
Compound interest is the process where money earns interest not only on the original principal but also on accumulated interest over time.
It is widely used in savings accounts, investments, pensions, and loans. Understanding compound interest helps explain why long-term investing and consistent saving can dramatically increase wealth.
While compounding can accelerate savings growth, it can also increase debt if borrowing costs accumulate over time.
Key Facts
- Compound interest earns returns on both principal and previously earned interest.
- More frequent compounding periods increase total growth or borrowing cost.
- Higher interest rates significantly accelerate compounding effects.
- Regular contributions can dramatically increase total accumulated value.
- Investment returns may fluctuate even though compound interest assumes steady growth.
Formulas
- Compound Interest Formula
A = P (1 + r/n)^(n × t)- Calculates total value after compounding. A = final amount, P = principal, r = interest rate, n = compounding frequency, t = time. - Interest Earned
Compound Interest = A − P- Calculates total interest earned or charged over the investment or loan period. - Future Value with Regular Contributions
FV = P(1+r/n)^(nt) + C × [((1+r/n)^(nt) − 1) ÷ (r/n)]- Estimates growth when regular deposits or investments are added.
Investment Growth Over Time
- £1,000 invested at 7% annually grows to about £1,967 after 10 years.
- The same investment grows to roughly £3,870 after 20 years due to accelerated compounding.
- Adding £50 per month at 7% can grow into tens of thousands over several decades.
Compound Interest in Borrowing
- Credit card balances can grow quickly if interest compounds while only minimum payments are made.
- Loans with compound interest increase total repayment costs over time.
- Paying extra toward the principal reduces total interest and shortens repayment duration.
FAQs
Why is compound interest so powerful?
Because interest earns additional interest over time, causing growth to accelerate rather than increase at a constant rate.
How often does compounding occur?
Compounding can occur yearly, monthly, daily, or continuously depending on the financial product. More frequent compounding usually increases total growth or borrowing cost.
Is compound interest guaranteed in investments?
No. Investment returns vary depending on market performance. Compound interest assumes consistent growth, but real investment returns fluctuate.
Why is starting early important for compound interest?
Starting early allows more time for interest to accumulate and compound, which significantly increases long-term growth.
Does compound interest apply to debt?
Yes. Credit cards, loans, and mortgages often use compound interest, which can increase total borrowing costs if balances are not paid down quickly.