Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (calculated only on the principal), compound interest causes your money to grow exponentially over time. For example, if you invest $10,000 at 7% compounded annually, after one year you earn $700. In year two, you earn interest on $10,700, not just the original $10,000. This "interest on interest" effect accelerates growth dramatically over long time periods.

The more frequently interest is compounded, the more you earn. With annual compounding, interest is calculated once per year. With monthly compounding, it is calculated 12 times per year, meaning you start earning interest on your interest sooner. For example, $10,000 at 7% compounded annually yields $19,671.51 after 10 years, while the same amount compounded daily yields $20,137.53, an extra $465.98. The difference becomes more significant with larger amounts and longer time horizons.

The effective annual rate (EAR) is the actual annual return you earn after accounting for the effect of compounding. While the nominal (stated) rate might be 7%, if compounded monthly your EAR is actually 7.23%. The formula is: EAR = (1 + r/n)^n - 1, where r is the nominal rate and n is the number of compounding periods per year. The EAR is the best way to compare investments with different compounding frequencies.

Regular monthly contributions dramatically accelerate the growth of your investment. For example, a $10,000 initial investment at 7% for 20 years grows to about $38,697. But adding just $200/month in contributions boosts the final amount to over $142,000. The key is consistency: even small monthly contributions compound significantly over decades, making regular investing one of the most powerful wealth-building strategies.

Dewx includes an OPS Hub with financial tools for tracking revenue, expenses, cash flow forecasting, and automated invoicing. You can set up financial dashboards, track business performance metrics, and integrate with your banking and accounting systems, all in one platform alongside your inbox, CRM, and outreach tools. Join the beta to see how Dewx simplifies business finance management.