Interest Calculator
Simple interest calculation.
About the Interest Calculator
Simple interest calculation.
The Power of Compound Interest
Albert Einstein reportedly called compound interest the "eighth wonder of the world." Unlike simple interest (which is calculated only on the principal amount), compound interest is calculated on the principal plus the accumulated interest. This causes your money to grow exponentially over time.
Simple vs. Compound Interest
- Simple Interest: $1,000 at 5% for 10 years earns $50 per year flat. Total Interest: $500.
- Compound Interest: The interest earns its own interest. $1,000 at 5% compounded annually for 10 years earns ~$628.
Factors That Accelerate Growth
- Frequency: The more frequently interest compounds (daily vs. monthly vs. annually), the faster your money grows.
- Time: The longer you leave the money untouched, the more dramatic the "hockey stick" growth curve becomes.
- Rate: Higher returns obviously help, but consistency often beats high-risk, high-reward strategies.
Rule of 72
A quick mental shortcut: Divide 72 by your interest rate to see how many years it takes to double your money. For example, at a 8% return, your investment will double in roughly 9 years (72 / 8 = 9).