Everyday money
See what compounding changes.
Compare simple interest with compound interest using the same starting amount, rate, and timeline. Follow the formulas and see how the balances separate year by year.
Your result
The comparison will appear here.
Enter a starting amount to compare both interest methods.
Your comparison
Simple-interest balance
Compound-interest balance
Compounding difference
More than simple interest over this timeline
Effective annual rate
After within-year compounding
Year-by-year comparison
Simple interest grows by the same dollar amount each year. Compound interest grows on the principal and previously earned interest.
| Year | Simple balance | Compound balance | Difference |
|---|---|---|---|
Simple interest
Simple interest is calculated only on the original principal. Its formula is A = P(1 + rt), where P is principal, r is the annual rate as a decimal, and t is time in years.
Compound interest
Compound interest adds earned interest to the balance, so later interest can earn interest too. Its formula is A = P(1 + r/n)^(nt), where n is the number of compounding periods per year.
APR and effective yield
The stated annual rate does not reflect within-year compounding. The effective annual rate does, which makes it useful when comparing accounts with the same stated rate but different compounding schedules.
Use the model as a teaching estimate
Compounding more often usually raises the ending balance, but the effect depends on the rate and time. This comparison assumes the rate never changes and no money is added or withdrawn. For regular deposits, use the savings goal calculator instead.
This calculator provides educational estimates, not financial advice. It does not include fees, taxes, inflation, variable rates, minimum balances, day-count conventions, or lender-specific rounding. Actual account or loan calculations may differ.
Keep calculating
Related tools
Money
Savings Goal Calculator
Calculate a monthly savings target or estimate when regular contributions could reach a goal.
Money
Loan Payment Calculator
Estimate fixed monthly principal and interest, total interest, and an amortization schedule.
Money
Debt Payoff Calculator
Estimate a payoff date, total interest, and how much time an extra monthly payment could save.