Calculate simple and compound interest with precision. Get detailed breakdowns, visual charts, and understand how your money grows over time.
Total Interest
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Final Amount
$0
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Understanding the difference between simple and compound interest is crucial for making informed financial decisions.
Interest calculated only on the principal amount throughout the entire period.
Formula: SI = P × R × T / 100
Interest calculated on both principal and accumulated interest from previous periods.
Formula: A = P(1 + r/n)^(nt)
Principal: $10,000 | Rate: 5% | Time: 5 years
Interest: $2,500
Total: $12,500
Principal: $10,000 | Rate: 5% | Time: 5 years
Interest: $2,763
Total: $12,763
Difference: Compound interest earns $263 more than simple interest in this example!
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Master the fundamentals of interest calculations and make smarter financial decisions with our comprehensive guide.
The initial amount of money invested or borrowed, before any interest is added.
The percentage charged on the principal amount, typically expressed as an annual percentage rate (APR).
How often interest is calculated and added to the principal (annually, quarterly, monthly, daily).
The duration for which the money is invested or borrowed, affecting total interest earned or paid.
Calculate how much your savings will grow over time with compound interest.
Estimate returns on investments and compare different investment options.
Understand the true cost of borrowing and compare loan offers.
Plan for future education expenses and calculate required savings.
Start investing early to maximize the power of compound interest. Even small amounts can grow significantly over time.
The longer your money is invested, the more time it has to grow. Consider long-term investment strategies.
Always compare different interest rates and compounding frequencies when making financial decisions.
Consider inflation when calculating real returns on investments.
Higher interest rates often come with higher risks. Assess your risk tolerance.
Interest earned may be subject to taxes. Consult a tax professional for advice.
For major financial decisions, consider consulting with a financial advisor.
Get answers to common questions about interest calculations and financial planning.
Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and previously earned interest. Compound interest grows exponentially over time, making it more powerful for long-term investments.
More frequent compounding generally leads to higher returns. Daily compounding will yield more than monthly, which yields more than annual compounding. However, the difference becomes less significant at lower interest rates.
This calculator is accurate for fixed-rate investments like savings accounts, CDs, and bonds. For variable investments like stocks or mutual funds, returns fluctuate and cannot be predicted with simple interest formulas.
Yes, inflation reduces the purchasing power of money over time. To calculate real returns, subtract the inflation rate from your interest rate. This gives you the real rate of return adjusted for inflation.
Yes, this calculator works for loans too. The interest calculated represents what you'll pay in addition to the principal. For complex loan structures with monthly payments, consider using our dedicated loan calculator.
The Rule of 72 is a quick way to estimate how long it takes for an investment to double. Divide 72 by your interest rate. For example, at 6% interest, your money doubles in approximately 12 years (72 ÷ 6 = 12).
No, these are mathematical projections based on fixed rates. Actual investment returns can vary due to market conditions, fees, taxes, and other factors. Use these calculations as estimates for planning purposes.
Review your calculations annually or whenever there are significant changes in interest rates, your financial situation, or investment goals. Regular reviews help ensure you stay on track with your financial plans.
Start early, invest regularly, choose accounts with higher interest rates and more frequent compounding, and avoid withdrawing funds to let compound interest work its magic. Even small, consistent contributions can grow significantly over time.
In most cases, yes. Interest earned on savings accounts, CDs, and bonds is typically taxable income. However, some accounts like Roth IRAs offer tax-free growth. Consult a tax professional for specific advice about your situation.