How Compound Interest Works
You earn interest not just on your original money, but on the interest you've already earned. Your money earns money on itself.
Final amount
Principal
Annual rate
Years
$10,000 at 7% for 20 years
Same money, same rate, dramatically different outcomes.
| Method | Calculation | Result |
|---|---|---|
| Simple interest | $10,000 + (7% × $10,000 × 20) | $24,000 |
| Compound interest | $10,000 × (1.07)²⁰ | $38,697 |
Compound interest earns you nearly $15,000 more — without doing anything differently.
The base keeps growing
Each year's interest is calculated on a larger and larger balance.
| Year | Balance | Interest that year |
|---|---|---|
| 1 | $10,700 | $700 |
| 5 | $14,026 | $982 |
| 10 | $19,672 | $1,377 |
| 20 | $38,697 | $2,529 |
| 30 | $76,123 | $4,976 |
The Rule of 72
Divide 72 by the interest rate to find how many years it takes to double your money.
to double
to double
What accelerates it most
Time
The biggest factor. Starting early matters far more than the amount.
Rate
Even 1–2% more makes a massive difference over decades.
Contribution frequency
Monthly contributions compound much faster than a single lump sum.
Compounding frequency
Daily vs. annual compounding makes a small but real difference.
Compound interest calculator
Interactive Calculator
LiveFinal Value
$142,882
Interest Earned
$84,882
Total Contributed
$58,000
Doubles every
~10 yrs