Interest Calculator
Calculate simple interest and compound interest, compare different compounding frequencies, and visualize growth over time
Simple Interest
Compound Interest (Annual)
Compound Interest by Frequency
Year-by-Year Growth Comparison
| Year | Simple Interest | Simple Total | Compound Interest | Compound Total | Difference |
|---|---|---|---|---|---|
| 1 | $500 | $10,500 | $500 | $10,500 | +$0 |
| 2 | $1,000 | $11,000 | $1,025 | $11,025 | +$25 |
| 3 | $1,500 | $11,500 | $1,576 | $11,576 | +$76 |
| 4 | $2,000 | $12,000 | $2,155 | $12,155 | +$155 |
| 5 | $2,500 | $12,500 | $2,763 | $12,763 | +$263 |
| 6 | $3,000 | $13,000 | $3,401 | $13,401 | +$401 |
| 7 | $3,500 | $13,500 | $4,071 | $14,071 | +$571 |
| 8 | $4,000 | $14,000 | $4,775 | $14,775 | +$775 |
| 9 | $4,500 | $14,500 | $5,513 | $15,513 | +$1,013 |
| 10 | $5,000 | $15,000 | $6,289 | $16,289 | +$1,289 |
About This Tool
An interest calculator is a powerful tool for understanding how your money grows over time through simple or compound interest. Whether you're evaluating savings accounts, investments, or loans, knowing the difference between simple and compound interest is crucial for making informed financial decisions.
Simple Interest Explained
Simple interest is calculated only on the principal amount. The formula is straightforward: Interest = Principal × Rate × Time. For example, if you invest $10,000 at 5% annual simple interest for 10 years, you'll earn $5,000 in interest ($10,000 × 0.05 × 10). Simple interest is less common in modern savings and investment products but may be used for short-term loans or certain bonds.
The Power of Compound Interest
Compound interest is interest calculated on both the principal and previously earned interest. Albert Einstein allegedly called it "the eighth wonder of the world" because your money grows exponentially rather than linearly. With compound interest, you earn interest on your interest, creating a snowball effect over time. The formula is: A = P(1 + r/n)^(nt), where A is the final amount, P is principal, r is annual rate, n is compounding frequency, and t is time in years.
Compounding Frequency Matters
The frequency of compounding significantly impacts your returns. Interest can compound annually, semi-annually, quarterly, monthly, or even daily. More frequent compounding means more opportunities for your interest to earn interest, resulting in higher returns. For instance, $10,000 at 5% for 10 years yields $6,289 with annual compounding, but $6,487 with daily compounding - a difference of nearly $200 from compounding frequency alone.
Practical Applications
Use this calculator when comparing savings accounts (which typically compound daily or monthly), evaluating investment returns, planning retirement savings, or understanding loan interest. For long-term goals, compound interest with regular contributions can turn modest savings into substantial wealth. Even a 1% difference in interest rate or switching from monthly to daily compounding can mean thousands of dollars over decades. Start investing early to maximize the time your money has to compound and grow.