Calculate simple and compound interest with additional contributions, visual growth charts, and year-by-year breakdown. Presets for savings, CDs, and investments. 100% client-side — nothing leaves your browser.
| Year | Opening Balance | Interest Earned | Contributions | Closing Balance |
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Understanding the difference between simple and compound interest is one of the most important financial concepts you can learn. It directly affects how fast your money grows.
Simple interest is calculated only on the original principal. The formula is straightforward: Interest = Principal × Rate × Time. If you invest $10,000 at 5% simple interest for 10 years, you earn exactly $5,000 in interest — $500 per year, every year.
Compound interest is calculated on the principal plus all previously earned interest. Each period, your interest earns interest on itself. That same $10,000 at 5% compounded monthly for 10 years grows to $16,470 — $1,470 more than simple interest, purely from compounding.
The more frequently interest compounds, the more you earn. Daily compounding earns slightly more than monthly, which earns more than annually. The formula A = P(1 + r/n)nt shows that increasing n (frequency) increases the final amount.
Compound interest becomes dramatically more powerful over time. $10,000 at 7% grows to $19,672 in 10 years, $38,697 in 20 years, and $76,123 in 30 years. The interest earned in year 30 alone is more than the original investment.
Small changes to how you save and invest can compound into massive differences over time. These strategies help you get the most from compound interest.
Time is compound interest's best friend. Starting 10 years earlier with $200/month at 7% gives you $200K+ more at retirement than someone who waits — even if they invest twice as much monthly.
Set up automatic monthly transfers to your savings or investment account. Consistency beats timing. $200/month at 7% for 30 years becomes $243,994 — you only deposited $72,000 of that.
Never withdraw interest or dividends. Let them compound. Pulling out just 1% of returns annually can cost you 20-30% of your final balance over 25 years.
Annual Percentage Yield (APY) includes compounding effects. A 5% APR compounded daily has an APY of 5.13%. Always compare APY between accounts — it’s the true return.
The difference between a 0.5% and 4.5% savings account on $50K is $2,000 per year. High-yield savings accounts and CDs can 10x your interest earnings with zero extra risk.
Savings accounts (4-5%) are safe. Index funds (7-10% historically) involve market risk but dramatically outperform over 20+ year horizons. Use the calculator to compare both scenarios.
Simple interest is calculated only on the original principal amount. Compound interest is calculated on the principal plus all previously accumulated interest. Over time, compound interest grows exponentially while simple interest grows linearly. For a $10,000 investment at 5% over 20 years, simple interest earns $10,000 while compound interest (monthly) earns $17,160.
More frequent compounding means interest is calculated and added to your balance more often, resulting in slightly higher returns. A 6% rate compounded annually yields 6.00% effective, while compounded monthly it yields 6.17%, and daily yields 6.18%. The biggest jump is from annual to monthly compounding; daily vs monthly differences are minimal.
The compound interest formula is A = P(1 + r/n)nt, where A = final amount, P = principal, r = annual rate (as decimal), n = compounding periods per year, t = time in years. For regular contributions, add the future value of annuity: FV = PMT × [((1 + r/n)nt − 1) / (r/n)]. This calculator handles both automatically.
The effective annual rate converts any compounding frequency to its equivalent annual return. It lets you compare accounts with different compounding schedules. The formula is EAR = (1 + r/n)n − 1. A 5% nominal rate compounded monthly has an EAR of 5.12%, meaning that’s what you actually earn per year accounting for compounding.
Beginning of period (annuity due) means deposits earn interest for one extra period, giving slightly higher returns. End of period (ordinary annuity) is more realistic for most real-world scenarios like paycheck-based 401(k) contributions. Over 30 years at 7% with $200/month deposits, beginning-of-period timing earns roughly $1,400 more per year than end-of-period.
Start early — time is the most powerful factor. Make regular contributions even if they’re small. Choose accounts with higher compounding frequency. Never withdraw interest. Compare APY (not APR) between accounts. Even a 1% higher rate compounds into a massive difference over 20+ years. Use this calculator to see exactly how each variable affects your final balance.
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