Compound interest earns returns on your principal and on interest already credited. Over decades, that feedback loop dominates long-term savings—often called the eighth wonder of compound growth.

This guide walks through the formula, compounding frequency, and Toolsle’s free compound interest calculator.

The formula

A = P × (1 + r/n)^(n×t)

With monthly contributions, use annuity formulas or the calculator—hand math gets tedious quickly.

Simple vs compound (quick example)

$10,000 at 7% for 20 years:

• Simple interest — $10,000 + (10,000 × 0.07 × 20) = $24,000
• Compound annually — ≈ $38,697

The gap widens every extra decade.

Compounding frequency

For planning, annual or monthly is usually enough.

Pair with retirement planning

Use the retirement calculator for age-based withdrawal estimates and the 4% rule. Use the loan calculator when interest works against you on debt.

Common mistakes

• Confusing APR with APY
• Ignoring fees and taxes
• Assuming linear market returns every year

Try the free compound interest calculator

Set principal, rate, years, contribution amount, and compounding on the compound interest calculator. Review year-by-year breakdowns and inflation-adjusted totals.