Compound Interest Explained (+ Free Calculator)

Compound interest is interest earned on both your original money and the interest it has already earned — which makes savings and investments grow faster over time. The formula is A = P(1 + r/n)^(nt). Here's what that means in plain terms, why time is the biggest factor, and a free compound interest calculator.

The compound interest formula

A = P(1 + r/n)^(nt), where P is the principal, r the annual rate, n the times it compounds per year, and t the years. $1,000 at 8% compounded annually for 10 years grows to about $2,159 — more than double, with over $1,000 of it pure interest. The Compound Interest Calculator runs any scenario.

Why time beats amount

Because growth compounds, early years matter far more than later ones — the interest keeps earning interest. Starting a decade earlier often beats saving much larger amounts later. This is why "start now" is the most valuable investing advice there is.

The Rule of 72

A quick mental shortcut: divide 72 by your interest rate to estimate the years to double your money. At 8%, that's 72 ÷ 8 = 9 years to double.

The other side: debt

Compounding works against you on credit cards and loans. See what borrowing really costs with the Loan Calculator before taking on high-interest debt.

Bottom line

Compound interest grows money exponentially — the earlier and longer you invest, the more it works. Model your growth free.