How is compound interest calculated?

Compound interest is calculated as FV = P × (1 + r/n)^(nt), where P is the principal, r is the annual rate, n is the compounding periods per year, and t is years. With recurring contributions, add PMT × [((1 + r/n)^(nt) − 1) / (r/n)]. Our calculator handles both parts automatically.

What is the difference between simple and compound interest?

Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus accumulated interest. Over time, compounding grows exponentially while simple interest grows linearly — a $10,000 sum at 8% becomes $46,610 (simple) versus $100,627 (compounded monthly) over 30 years.

How does compounding frequency affect growth?

More frequent compounding reinvests interest sooner, so your balance grows faster. At 8% over 30 years, $10,000 grows to about $100,627 compounded monthly versus $93,219 compounded semi-annually. The gap widens with larger sums and longer horizons.

How much will I have if I save $500 a month for 30 years?

Saving $500 per month at an 8% average return compounded monthly for 30 years grows to about $745,000 from contributions alone, plus growth on any starting balance. With a $10,000 starting balance, the total reaches about $811,627. Use our calculator to test your own numbers.

What is a good interest rate to assume for compound interest?

For a diversified stock portfolio, a realistic long-term assumption is 7–10% (the historical S&P 500 average). For savings accounts expect 3–5%, and for bonds 4–6%. Always use a conservative rate for planning so you are not caught short — our calculator lets you adjust instantly.

Compound Interest Calculator

Free compound interest calculator — see how your money grows with compounding and monthly contributions. Get year-by-year projections, total interest earned, and charts.

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