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Interactive Financial Island
Rule of 72 VerifiedCompound Interest Growth Calculator
$10,000
$500/mo
7.5%
20 Years
Estimated Total Balance$321,474
Total Deposits:$130,000
Total Compound Interest:+$191,474
Interest-to-Deposit Ratio:1.47x
💡 Compounding multiplies your returns because interest earns its own interest over time.
How Does Compound Interest Work?
Compound interest is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan. Thought to have originated in 17th-century Italy, compound interest can be thought of as "interest on interest."
The Power of the Compounding Frequency
The more frequently interest is compounded—daily versus monthly or annually—the higher the effective annual rate (EAR). For long-term investors holding broad-market index funds, continuous dividend reinvestment harnesses this exponential curve.
The Rule of 72 Quick Estimation
To estimate how many years it will take for your money to double at a given annual interest rate, divide 72 by the rate. For example, at an 8% annual return: 72 ÷ 8 = 9 years to double your money.