How it works
Compound interest means you earn interest on your interest. The more often interest compounds and the longer you stay invested, the faster your balance grows.
Formula
A = P(1 + r/k)^(k·t) + C × ((1 + rₘ)ⁿ − 1) ÷ rₘ rₘ = effective monthly rate, n = months
Example
$10,000 plus $200 a month at 7% compounded monthly grows to about $144,600 after 20 years.
Assumptions & limitations
- A constant rate of return or inflation every year.
- Excludes fees and taxes unless entered.
- Contributions are made regularly and on time.
Frequently asked questions
What's the difference between APR and APY?
APR is the simple yearly rate. APY (effective annual rate) includes the effect of compounding, so it's slightly higher.
What is the rule of 72?
Divide 72 by your interest rate to estimate how many years it takes to double your money. At 8%, about 9 years.