# Compound Interest Calculator (2023)

Use this compound interest calculator to estimate how your investments and savings will grow over time with compounding interest.

## What is Compound Interest?

Compound interest refers to the interest you earn on interest. It assumes the interest earned on your savings or investment account is re-invested and also earns interest, growing your account faster over time.

For example, if you put \$5,000 in a savings account that earns 2% interest and it is compounded once a year. At the end of the first year, you will have earned \$100 in interest.

In year 2, your total interest will be \$202, and in year 3, your total interest will be \$306.04.

Compare this to simple interest calculations for the same principal amount and interest rate and you get:

• Year 1: \$100 interest
• Year 2: \$200 total interest
• Year 3: \$300 total interest

For the compound interest calculation, you earn an extra \$2 and \$6.04 in years 2 and 3 respectively because interest is also earned on the interest earned on the principal.

If the compounding period becomes daily or monthly and/or you make regular contributions, you will see your savings grow a lot faster through the magic of compounding.

Compound interest is calculated using this formula:

A = P (1 + r/n)nt

Where A = the future value of your savings, P = your principal investment, r = interest rate (expressed as a decimal), n = number of compounding periods in each year, and t = time in years your money is invested for.