Albert Einstein called compound interest "the eighth wonder of the world" and for good reason. Understanding this fundamental financial concept can be the difference between building wealth and struggling financially.
Use our free calculator to see how your savings can grow over time
Calculate Growth →Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods. In simple terms, it's "interest on interest" that causes wealth to grow exponentially over time.
Interest earned only on the original principal
Interest earned on principal + accumulated interest
Compound interest is calculated using this mathematical formula:
Where:
$19,672
Almost doubles your money
$38,697
Nearly 4x your initial investment
$76,123
Over 7.5x your initial investment
The longer your money compounds, the more dramatic the growth. Starting early is the single most important factor in building wealth through compounding.
Small differences in interest rates create huge differences over time. Earning 8% instead of 6% can double your ending balance over 30 years.
How often interest is calculated and added to your balance:
Our calculator shows how compounding frequency affects your growth
Compare Frequencies →Use this simple rule to estimate how long it takes your money to double:
Examples:
Traditional savings vehicles with lower returns but guaranteed safety. Perfect for emergency funds and short-term goals.
Stock market investments historically return 7-10% annually. The primary vehicle for long-term wealth building.
Tax-advantaged accounts where compounding works even more effectively due to tax deferral.
Sarah: Invests $5,000/year from age 25-35 (10 years) = $50,000 total
Mike: Invests $5,000/year from age 35-65 (30 years) = $150,000 total
Result at age 65 (7% return):
Sarah invested 1/3 as much but ended with more money!
Our free calculator helps you visualize the power of compounding:
Every year you delay costs you significantly in long-term growth potential.
Even small regular contributions grow substantially over time due to compounding.
Taking money out interrupts the compounding process and dramatically reduces final results.
Compound interest is the most powerful tool available for building long-term wealth. Whether you're saving for retirement, a down payment, or financial independence, understanding and harnessing compounding can help you achieve your goals faster.
The best time to start was yesterday. The second best time is now.
← Back to All Calculators