# Compound interest calculator

Our compound interest calculator can help determine how an initial amount of money, known as the principal, will grow over time when it earns interest that is compounded at regular intervals.

Page written by Ian Hawkins. Last reviewed on June 13, 2024. Next review due October 1, 2025.

\$
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\$
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5 years
2%

This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.

Total balance

\$0

Total principal

\$0

Compound interest

\$0

## What is compound interest?

Compound interest is earned not only on the initial principal amount invested but also on the accumulated interest from previous periods. In essence, it’s interest on interest, leading to exponential growth of your savings or investment over time.

## What is the compound interest formula, with an example?

The formula for calculating compound interest is A = P(1 + r/n)^(nt)

Where:

A = the future value of the investment/loan, including interest
P = the principal amount (initial investment or loan amount)
r = the annual interest rate (in decimal)
n = the number of times that interest is compounded per year
t = the time the money is invested/borrowed for, in years

Example: Let’s say you invest \$1,000 in a savings account with an annual interest rate of 5%, compounded monthly (n = 12) and, and you plan to keep the money invested for 3 years. Using the compound interest formula:

A = 1000(1 + 0.05/12)^(12*3)
A = 1000(1 + 0.004167)^(36)
A = 1000(1.004167)^(36)
A ≈ 1000(1.161155)
A ≈ \$1,161.16

So, after 3 years, your investment of \$1,000 would grow to approximately \$1,161.16, thanks to compound interest.

Our calculator requires you to input the initial amount (principal), the interest rate, the number of times interest is compounded per year, and the time period for which the interest will be calculated. With this information, the calculator can provide you with an estimate of the final amount that will be accrued.

This tool is particularly useful for individuals, investors, and financial professionals to plan and strategise for savings, investments, business loans, and other financial endeavours. It enables one to see how different interest rates and compounding frequencies can impact the growth of their money over time.