Interest Calculator
Compare simple and compound interest models side-by-side. See how compounding frequency (daily vs. monthly) drastically changes your long-term returns.
Parameters
Simple Model
Compound (Annual)
Simple vs. Compound
Simple interest is calculated solely on the principal amount. It remains constant throughout the duration of the investment. Compound interest, however, is calculated on the principal plus any accumulated interest from previous periods. This "interest on interest" effect allows your wealth to grow exponentially over time.
Compound Frequency
The more frequently interest is compounded, the faster your balance grows. Daily compounding will always yield a higher return than monthly or annual compounding, even if the nominal interest rate remains the same. This is why credit cards (compounding daily) grow debt faster than savings accounts (often monthly).
Rule of 72
A common shortcut for investors is the Rule of 72. To find out approximately how many years it takes for an investment to double with compound interest, divide 72 by the annual interest rate. For example, at a 6% return, your money doubles in roughly 12 years (72 / 6).