Interest Calculator (Simple & Compound)
Calculate simple and compound interest on your savings or investments. Compare how different rates, compounding frequencies, and time periods affect your returns.
Results
How to Use This Tool
- Enter your principal amount — the initial sum you're investing or saving.
- Enter the annual interest rate as a percentage.
- Enter the time period in years.
- Choose a compounding frequency (annually, semi-annually, quarterly, monthly, or daily).
- Compare the Simple Interest and Compound Interest columns to see total value and interest earned for each method.
- Check the "compound interest earns $X more" line to see the exact advantage of compounding over simple interest.
Formula & How It Works
Simple Interest
Simple Interest = P × r × t; Total Value = P × (1 + r × t)Simple interest is earned only on the original principal (P) — it never earns interest on itself, so growth is linear over time (t years at annual rate r).
Compound Interest
Total Value = P × (1 + r/n)^(n×t)Interest is calculated and added to the balance n times per year, so each subsequent period earns interest on both the principal and all previously accumulated interest — producing exponential growth.
Compounding Advantage
Advantage = Compound Interest Earned − Simple Interest EarnedThe extra money earned from compounding growth versus a flat simple-interest calculation over the same principal, rate, and time period.
Practical Examples & Common Use Cases
Example 1: $10,000 at 5% for 10 years, monthly compounding
Simple interest: $10,000 × 0.05 × 10 = $5,000, total value $15,000. Compound interest: $10,000 × (1 + 0.05/12)^(12×10) ≈ $16,470, total interest earned ≈ $6,470 — about $1,470 more than simple interest.
Example 2: $5,000 at 8% for 20 years, annual compounding
Compound total: $5,000 × (1.08)^20 ≈ $23,305, versus simple interest total of $5,000 × (1 + 0.08×20) = $13,000. Compounding produces over $10,000 more in this long-horizon example.
Example 3: Comparing compounding frequency
On $10,000 at 6% for 5 years: annual compounding gives ≈$13,382, while daily compounding gives ≈$13,498 — a modest $116 gain from more frequent compounding at the same stated rate.
Frequently Asked Questions
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus any previously earned interest, leading to exponential growth over time.
More frequent compounding (daily vs annually) produces slightly higher returns because interest starts earning interest sooner. The difference is most noticeable with higher rates and longer time periods.
Simple interest is common in short-term loans, auto loans, and some bonds. Most savings accounts and investments use compound interest.
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%, your money doubles in approximately 12 years.
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