Simple vs Compound Interest Calculator
See exactly how much compounding earns you over plain simple interest. Enter your starting amount, the annual rate, the term and how often it compounds — you'll get both final values side by side and the extra that compounding adds. Updates as you type.
The two formulas
simple: A = P × (1 + r × t)
compound: A = P × (1 + r/n)n×t
where P = principal, r = annual rate (decimal), t = years, n = compounds per year.
- Time is the biggest lever. The compound advantage grows every year — small early, large later.
- Rate matters next. A higher rate widens the gap quickly over long terms.
- Frequency helps a little. Monthly beats annual, daily beats monthly — but only by a sliver.
This is an educational estimate with a fixed rate and no extra contributions, fees or taxes. Not financial advice.
FAQ
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal: interest = principal × rate × years. Compound interest is calculated on the principal plus all previously earned interest, so it grows faster over time. The gap between them widens the longer you invest and the more often interest compounds.
How is compound interest calculated?
The formula is A = P × (1 + r/n)^(n×t), where P is the principal, r is the annual rate as a decimal, n is the number of compounding periods per year, and t is the number of years. More frequent compounding (monthly or daily) produces a slightly higher result than annual.
Why does compound interest matter so much?
Because you earn interest on your interest, the growth accelerates over time — this is why starting early matters far more than the exact rate. Over decades, a compounding account can end up worth dramatically more than the same money earning only simple interest.
Does compounding frequency make a big difference?
It helps, but less than people expect. Monthly compounding beats annual by a small margin at typical rates; daily is marginally higher again. The rate and the time invested matter far more than whether interest compounds monthly or daily.
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