How to Calculate Compound Interest: Formula, Examples & Free Calculator
Compound interest is how your money makes money on the money it already made. This guide explains the compound interest formula with step-by-step examples you can try yourself.
The Compound Interest Formula
A = P(1 + r/n)^(nt)
A = Final Amount | P = Principal | r = Annual Rate | n = Compounds per Year | t = Years
Real Example: $10,000 at 7% for 30 Years
Let's calculate what happens when you invest $10,000 at a 7% annual return for 30 years:
That's a 661% return — and you didn't add a single dollar after the initial investment. Now imagine adding $500/month...
The Power of Regular Contributions
$10,000 initial + $500/month at 7% for 30 years = $638,728. Your total contributions: $190,000. The remaining $448,728 is pure compound growth — money your money earned.
Why Starting Early Matters More Than Anything
Two investors both contribute $500/month at 7%:
- Alice starts at 25, stops at 35: Invests $60,000 total. At 65, her account is worth $602,070.
- Bob starts at 35, contributes until 65: Invests $180,000 total. At 65, his account is worth $566,764.
Alice invested one-third as much but ended up with MORE money — all because she started 10 years earlier. That's the power of time + compound interest.
Calculate Your Own Compound Interest
Try different scenarios and see the results instantly with our free calculator.
Try the Calculator →Rule of 72: Quick Mental Math
To estimate how long it takes money to double: 72 ÷ interest rate. At 7%, your money doubles every 10.3 years. At 10%, every 7.2 years. This simple rule helps you quickly evaluate any investment's growth potential.