Finance 2026-05-03 5 min read By Konvertibly Team

Compound Interest Calculator: The Formula That Builds Wealth

Understand compound interest, the Rule of 72, and how frequency of compounding affects your returns — with worked examples for savings and investments.

Compound Interest: Why Einstein Called It the Eighth Wonder

Compound interest is interest earned on both the original principal and the accumulated interest from previous periods. Unlike simple interest, which only grows the original amount, compound interest grows exponentially — and time is its most powerful variable.

The Compound Interest Formula

A = P × (1 + r/n)^(n×t)

A = final amount
P = principal
r = annual interest rate (decimal)
n = compounding periods per year
t = time in years

Example: £5,000 at 7% compounded annually for 20 years

A = 5,000 × (1 + 0.07)²⁰ = 5,000 × 3.8697 = £19,348

Simple interest over the same period: £5,000 + (5,000 × 0.07 × 20) = £12,000. Compounding adds an extra £7,348.

Compounding Frequency Matters

Annual: £5,000 → £19,348
Monthly: £5,000 → £20,097
Daily: £5,000 → £20,138

More frequent compounding = slightly higher returns. Monthly vs annual makes a real difference; daily vs monthly is marginal.

The Rule of 72

Years to double = 72 ÷ annual interest rate (%)

At 6%: money doubles in 72÷6 = 12 years. At 9%: 8 years. At 3% (inflation): purchasing power halves in 24 years — a useful reminder for keeping savings in productive assets.

Calculate compound growth: Free Compound Interest Calculator