📈 Interest Calculator
Simple vs compound interest growth over time. Runs privately in your browser.
Simple interest versus compound
Simple interest is calculated only on the original principal: 100 at 5% earns a flat 5 every year. Compound interest is calculated on the running balance, so interest earns interest. Over short periods the difference is small; over decades it dominates. This is the single most important idea in personal finance.
The calculator supports common compounding frequencies — yearly, quarterly, monthly, and so on. More frequent compounding slightly increases the final value at the same nominal rate, because interest starts earning interest sooner. The effect is real but modest: monthly vs annual compounding on 10,000 at 6% for 10 years is a difference of about 40.
Both formulas, side by side
Simple interest: FV = P × (1 + r × t). Compound interest: FV = P × (1 + r/n)^(n × t), where r is the annual rate as a decimal, n is compounding periods per year, and t is years. Enter 0 periods to force the simple-interest path.
10,000 at 6% for ten years
Put 10,000 at 6% for 10 years. With simple interest it grows to 16,000 — 6,000 earned. Compounded monthly it grows to about 18,194. The extra 2,194 is compounding at work. Extend to 30 years and the gap becomes dramatic: simple gives 28,000 while monthly compounding gives about 33,600.
Nominal, effective, and other confusions
- Mixing up nominal and effective rates. A 6% rate compounded monthly yields an effective annual rate of about 6.17%, not 6%.
- Forgetting that inflation erodes real returns — 3% growth with 3% inflation is roughly break-even in purchasing power.
- Assuming past compound growth continues. Markets fluctuate; treat the result as a model, not a promise.
- Leaving the compounding field at the wrong frequency — the input matters, especially over long horizons.
Interest questions
What is the difference between simple and compound interest?
Simple interest is earned only on the original principal. Compound interest is earned on principal plus all accumulated interest, so growth accelerates over time.
Which compounding frequency should I choose?
Match the product: most savings accounts compound daily or monthly, many bonds pay semi-annually. If unsure, monthly is a reasonable middle ground.
Is 0 periods really simple interest?
Yes — choosing 0 periods tells the calculator to use the simple-interest formula, earning a flat r × t on the original principal.
Can I model monthly deposits?
Not in this tool. For a savings goal with regular monthly deposits, use the Savings Goal Calculator, which solves for the required monthly amount.
Why does my bank show a slightly different balance?
Banks may compound daily with actual/365 day counts, apply fees, or round per period. Small differences are expected.
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Tip: double-check inputs before relying on results for important decisions.