See how your money grows over time with compound interest. Visualize the power of long-term investing.
The Power of Compound Interest
Compound interest is one of the most powerful wealth-building tools available. Unlike simple interest, which only earns returns on your original deposit, compound interest earns returns on your returns — creating exponential growth over time.
This calculator uses monthly compounding (n=12), which is the most common compounding frequency for savings accounts and investment vehicles.
The Rule of 72
A handy shortcut to estimate how long it takes your money to double: divide 72 by your annual interest rate.
- At 6% interest: 72 ÷ 6 = 12 years to double
- At 8% interest: 72 ÷ 8 = 9 years to double
- At 10% interest: 72 ÷ 10 = 7.2 years to double
The magic of compounding becomes more dramatic the longer you invest. The gap between simply saving and letting compound interest work grows wider every year.
Why Start Early?
Time is the most valuable ingredient in compound growth. Starting just 10 years earlier can mean hundreds of thousands more at retirement. Even small monthly contributions add up enormously when compounded over decades.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods. Unlike simple interest, which only earns on the original amount, compound interest grows exponentially over time.
How does monthly compounding work?
With monthly compounding, interest is calculated and added to your balance 12 times per year. Each month, you earn interest on both your original deposit and all previously earned interest, creating a snowball effect that accelerates growth.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes for an investment to double. Simply divide 72 by the annual interest rate. For example, at 7% annual return, your money doubles in approximately 72/7 = 10.3 years.
How much difference do monthly contributions make?
Monthly contributions dramatically accelerate compound growth. A $1,000 deposit at 7% for 20 years grows to about $3,870 on its own. Adding $200/month more than triples that to over $106,000 — showing the power of consistent investing.