Financial · Live
Simple or compound,
side by side.
A free interest calculator that does both — simple interest (linear growth on the original principal) and compound interest (exponential growth on principal plus accrued interest). The result panel always shows both so you can see exactly how much the magic of compounding adds.
Inputs
Money & rate
Daily compounding earns slightly more than annual at the same rate — the "compound edge" widens with frequency.
- Simple total
- $15,000.00
- Compound total
- $16,470.09
- Compound edge
- + $1,470.09
Final balance · Compound
10 yr · 5% · Monthly
$6,470.09 interest earned on $10,000.00 — that's $1,470.09 more than Simple Interest at the same rate.
Trajectory
Year by year
The blue band is the Simple Interest balance; the amber band on top is what Compound Interest adds. The wider the amber band grows, the more compounding pulls ahead.
Comparison
Simple vs Compound, year by year
| Year | Simple | Compound |
|---|---|---|
| Y1 | $10,500.00 | $10,511.62 |
| Y2 | $11,000.00 | $11,049.41 |
| Y3 | $11,500.00 | $11,614.72 |
| Y4 | $12,000.00 | $12,208.95 |
| Y5 | $12,500.00 | $12,833.59 |
| Y6 | $13,000.00 | $13,490.18 |
| Y7 | $13,500.00 | $14,180.36 |
| Y8 | $14,000.00 | $14,905.85 |
| Y9 | $14,500.00 | $15,668.47 |
| Y10 | $15,000.00 | $16,470.09 |
Field guide
Simple interest vs. compound interest, in plain English.
Both formulas describe how money grows when it earns interest. The difference is what happens to the interest after each period:
- Simple interest pays interest only on the original principal, every period, indefinitely. The account grows in a straight line.
- Compound interest rolls each period's interest back into the principal, so the next period earns interest on a larger base. The account grows along an exponential curve.
Albert Einstein is widely (mis)quoted as calling compound interest "the eighth wonder of the world." Whether or not he ever actually said it, the math behind the saying is real: over decades, the gap between simple and compound growth on the same principal at the same rate becomes staggering.
The simple-interest formula
For principal P, annual rate r (as a decimal), and time t in years:
balance = P · (1 + r · t)
On $10,000 at 5% for 10 years: interest = 10,000 × 0.05 × 10 = $5,000, for a final balance of $15,000.
The compound-interest formula
For the same P and r, plus a number of compounding periods n per year:
interest = balance − P
Same $10,000 at 5% for 10 years compounded monthly (n = 12): 10,000 × (1 + 0.05/12)120 ≈ $16,470 , about $1,470 more than simple interest at the same rate. That difference, the compound edge, is what compounding gives you for free.
Why compounding frequency matters
The more often interest is compounded, the more the result edges upward. $10,000 at 5% for 10 years:
- Annually: ≈
$16,289 - Semi-annually: ≈
$16,386 - Quarterly: ≈
$16,436 - Monthly: ≈
$16,470 - Daily: ≈
$16,486
Notice that the gain from going from monthly to daily is tiny (about $16) compared to the gain from simple to compound (about $1,470). The big jump is moving from "no compounding" to "any compounding."
The Rule of 72, a useful shortcut
For compound interest, divide 72 by the interest rate (in percent) and you get a rough estimate of the number of years it takes for money to double. At 6%, money doubles in about 72 / 6 = 12 years. At 9%, in about 72 / 9 = 8 years. The shortcut isn't exact but it's surprisingly close for typical interest rates.
Where you actually see each one
- Simple interest: most personal-loan quoted rates (the underlying math is amortizing, but the rate charged is simple), some auto loans, short-term loans, certain promissory notes.
- Compound interest: savings accounts, certificates of deposit (CDs), most bonds, every credit card balance you carry, mortgages from the lender's perspective, and every investment-account balance.
On a savings account, compounding is your friend; on a credit card, it's your enemy. Same math, different sign.
A 30-year worked example
Park $10,000 at 7% for 30 years:
- Simple interest:
10,000 × (1 + 0.07 × 30) = $31,000. - Compound interest, monthly:
10,000 × (1 + 0.07/12)360 ≈ $81,165.
Same principal, same rate, same time, but compound delivered $50,165 more. That gap is why "start early, even small" beats "save more, later" in almost every personal-finance plan.
What this calculator doesn't model
- Recurring contributions: for monthly additions, see the Compound Interest Calculator or the Investment Calculator.
- Inflation: the Retirement Calculator translates nominal balances into today's purchasing power.
- Taxes: interest in a taxable account is typically taxed annually as ordinary income, dragging effective compound rates by 0.5–1.5%. Use a tax-advantaged account (Roth IRA, traditional 401(k), HSA) to compound without that drag.
- Variable rates: the calculator assumes one fixed rate over the entire term.
Disclaimer
This calculator is a planning tool. Real-world bank statements, loan contracts, and investment returns vary in small but real ways from these closed-form formulas. For an exact dollar figure on a specific account, ask your institution for the contract APY and the compounding convention.