How to Calculate Compound Interest

Compound interest earns interest on both principal and accumulated interest. Time and compounding frequency dramatically affect long-term growth.

Step-by-step

1. Identify principal (P), annual rate (r), compounding frequency (n), and time (t).
2. Calculate growth factor: (1 + r/n)^(nt).
3. Multiply principal by growth factor for final balance without contributions.
4. For monthly contributions: add each contribution compounded for remaining periods.
5. Compare results at different compounding frequencies (annual vs monthly).
6. Use our Compound Interest Calculator for instant projections with charts.

Open the Compound Interest Calculator to apply these steps with your own numbers instantly.

Frequently asked questions