Compound Interest Calculator: See How Fast Your Savings Can Grow

You have financial goals you want to reach, and a savings account or CD account can help you get there. The best savings accounts pay the highest rates, while charging the fewest fees.

A compound interest calculator can help you figure out how much your money might grow, so you can decide which account to open. We’ll walk you through how to use this helpful financial tool to maximize your savings.

Table of Contents

1. How to use a compound interest calculator
2. What is compound interest?
3. How to calculate compound interest
   1. Examples
4. Tips to maximize your earnings
5. Where to put your money to get the best return

How to use a compound interest calculator

Our compound interest calculator is straightforward to use. Here are some helpful terms to know as you get started.

• Starting balance: Your starting balance is how much you put into your savings account initially.
• Years to grow: Money needs time to grow, and our calculator measures that time in years.
• Annual interest rate: Annual interest rate is the rate your savings earns on a yearly basis.
• Compounding frequency: Compounding happens when you earn interest on your starting balance and the interest that accumulates. Interest can compound daily, monthly, quarterly, or annually.
• End balance: The end balance is how much money you have at the end of the savings period.
• Interest added: This is how much interest you earned while your money was in your savings account.

Easy enough, right? Now it’s time to put the calculator to work. Here’s how to use a compound interest calculator in four steps.

• Step 1: Enter your starting balance; there’s no minimum or maximum.
• Step 2: Enter how many years you plan to leave your money in your savings account.
• Step 3: Add the annual interest rate as a percentage, not a decimal.
• Step 4: Choose a compounding frequency (daily, monthly, quarterly, or annually).

If you’ve entered everything correctly, you should see two numbers on the top right. The first is your ending balance, or how much money you’ll end up with. Below that, you’ll see how much of that amount is the interest you earned.

What is compound interest?

Compound interest is the interest you earn on your initial deposit and the interest that accumulates. It’s different from simple interest, which is interest that accrues just on your initial deposit. Here’s a quick look at how they compare.

Simple Interest	Compound Interest
Calculated on the principal, interest rate, and savings term	Calculated on the principal, interest rate, and compounding frequency
Applies to some savings accounts and certain types of loans	Applies to high-yield savings accounts, investment accounts, and credit cards
Better when you’re borrowing	Better when you’re saving or investing

How to calculate compound interest

There’s a specific formula you can use to calculate compound interest. It looks like this:

A=P(1+nr​)nt

Here’s what the letters stand for:

• A = Amount of money accumulated
• P = Principal
• n = Number of times interest compounds annually
• r = Interest rate
• t = Time period that interest compounds

Doing the math by hand can get complicated. That’s why it’s easier to use a compound interest calculator that finds the answers for you in seconds.

Compound interest examples

Want to see how much your money could grow over time? Here are some examples of how compounding interest can pay off. We’ll assume that interest compounds daily for each example.

Principal	Annual interest rate	Term	Interest earned
$500	1.25%	1 year	$6
$1,000	2.50%	2 years	$51
$5,000	3.75%	3 years	$596
$10,000	4.00%	4 years	$1,735
$25,000	4.25%	5 years	$5,919

More frequent compounding means faster growth, whether you deposit a little money into your savings or a lot.

Tips to maximize your earnings

Saving money is a good thing, especially if you’re earning compound interest. Here are some ways to make the most of it.

• Automate. Set up automatic contributions to savings if possible, even if it’s a small amount. Every penny counts for compounding. 
• Shop around. Look for banks that offer great rates with minimal fees. Capital One 360 Performance Savings, for example, pays a generous APY with no monthly fee. 
• Go hands-off. If you don’t need to tap into your savings, leave it alone. The longer you can go without dipping in, the more room your money has to grow.

Also, keep an eye on rate trends. If the Fed seems poised to raise the federal funds rate, for example, that could mean higher rates on savings accounts.

Where to put your money to get the best return

We’ve already mentioned Capital One 360 as a good savings option, but where else can you get more bang for your buck? Here are a few other suggestions:

• SoFi: Earn up to a 4.50% APY with no monthly fees.
• Barclays: Earn up to a 4.10% APY and get a new account bonus when you meet certain requirements. 
• Betterment: Get a 3.75% APY with no fees and up to $2 million in FDIC coverage.
• Synchrony: Open a high-yield savings account or CD with no minimums or fees.