Our compound interest calculator can help you figure out what type of return you will be earning on your money, based on a given interest rate. Compound interest is added back into the principal amount of the investment, causing it to grow. As the principal grows, the interest that was added is now accruing interest. This is opposite of simple interest, in which the interest paid to the investment does not accrue interest itself.

Here’s an example of how compound interest works. Let’s say you have a $1,000 investment and it is earning 10 percent compound interest, when calculated after the first year, your investment would now be worth 1,100 dollars.The next year the new balance of $1,100 would be paid 10 percent interest, or $110 for a total of $1,210. If you had $1,000 in an investment that accrued simple interest then your investment would grow by $100 every year for the duration of the term.

Many institutions show their rate of return as annual percentage yield (APY) or annual percentage rate (APR). This helps you see what the interest rate would be as an annual percentage so you can decide which rate is best for you. The rate at which the interest is applied is calculated into the APY to give a standard to judge different interest rates. This levels the playing field for rates that compound every month, quarterly, bi-annually, or any time frame and helps you compare the percentage with others easily.

Obviously, you want to make sure your investments are growing in a compound interest account, and you want the interest to calculate as often as possible. The more often the interest is added to principal, the faster your money grows. Use our compound interest calculator to find out how quickly your investment will grow, and which account is best for you.