Compound Interest Calculator
Free compound interest calculator using A = P(1+r/n)^(nt). Enter principal, annual rate, compounding frequency, and years. Free online financial tool.
How Compound Interest Works
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. The formula is: A = P(1 + r/n)^(nt), where:
- A = final amount
- P = principal (initial investment)
- r = annual interest rate (decimal)
- n = number of times interest compounds per year
- t = number of years
Albert Einstein reportedly called compound interest the eighth wonder of the world. The key insight is that your earnings generate their own earnings over time, creating exponential growth.
The Power of Starting Early
Time is the most powerful factor in compound interest. Consider two investors:
- Investor A invests $5,000/year from age 25 to 35 (10 years, $50,000 total)
- Investor B invests $5,000/year from age 35 to 65 (30 years, $150,000 total)
At 7% annual return, Investor A ends up with approximately $602,000 at age 65, while Investor B has approximately $540,000 — despite investing three times less money. This is the power of starting early.
"복리는 투자에서 가장 강력한 도구 중 하나입니다. 수익을 재투자함으로써 투자금은 시간이 지남에 따라 기하급수적으로 성장할 수 있습니다."
💡 알고 계셨나요?
- Albert Einstein reportedly called compound interest "the eighth wonder of the world" — though historians cannot verify the quote, the math checks out.
- The concept of compound interest was documented in Babylonian clay tablets from around 1800 BC.
- Benjamin Franklin left $4,444 each to Boston and Philadelphia in his 1790 will, with instructions to accrue at compound interest for 200 years — the fund grew to over $6 million.
자주 묻는 질문
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal plus any previously earned interest. Over time, compound interest grows much faster.
How often should interest compound?
The more frequently interest compounds, the more you earn. Daily compounding yields slightly more than monthly, which yields more than annually. However, the differences become smaller as compounding frequency increases.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by the annual interest rate. At 6% interest, your money doubles in approximately 72/6 = 12 years.