Interest Calculator: Track Your Financial Growth
Understand how time and rates transform your money.
Whether you are saving for a child’s college fund, planning for retirement, or calculating the cost of a private loan, understanding interest is vital. Our Interest Calculator provides a clear breakdown of how principal balances change over time, helping families make smarter financial decisions.
Interest Calculator
Calculate Simple or Compound Interest
Results will appear here
Simple vs. Compound Interest
Understanding the difference between these two methods is key to long-term wealth building.
1. Simple Interest
Interest is calculated only on the initial amount of money (the principal)
Formula:
I = P × r × t
(Interest = Principal × Rate × Time)
2. Compound Interest
The “Eighth Wonder of the World.” Interest is calculated on the principal plus any interest already accumulated. This leads to exponential growth over time.
Formula:
A = P (1 + r / n)nt
(A = Final Balance, n = Number of times compounded per year)
The Power of Compounding Frequency
The more often interest is calculated (compounded), the faster your balance grows. Our calculator allows you to choose:
- Annually: Once per year.
- Quarterly: Every three months.
- Monthly: The standard for most savings accounts and credit cards.
- Daily: Maximizes growth for savers; increases costs for borrowers.
Frequently Asked Questions
A quick way to estimate how long it takes for your money to double. Simply divide 72 by your interest rate. For example, at a 6% interest rate, your money will double in approximately 12 years (72 ÷ 6 = 12)
In the US and Canada, banks use these terms carefully. APR (Annual Percentage Rate) does not include compounding within the year. APY (Annual Percentage Yield) does account for compounding, giving you the true annual return.
If your savings account earns 2% interest but inflation is 3%, your “real” rate of return is actually -1%. Your purchasing power decreases even though your balance is technically going up.
In the UK, US, and Canada, interest earned in standard savings accounts is generally considered taxable income. However, accounts like ISAs (UK), IRAs (US), or TFSA/RRSPs (Canada) offer tax-advantaged growth.