\$
The more initial saving the more interest you earn, try different values to see long term affects.
Months
Choose longer periods and see the power of compound interest. Look at the monthly earnings adding up quickly.
%
Check your bank yearly saving account rates, you can play with numbers to see the affect.
%
Most countries applies tax on interest income. If you dont know you can just leave it 0.

### How Compound Interest Works?

In normal circumstances calculating the interest earning is as simple as multiplying your initial balance with the interest rate. In case of compound interest you start to add your earnings in each time period to the principle and apply the interest on top. This causes a steady growth on the amount. If we are talking about a loan debt it might be a disaster especially if debt is over due and paying it will be harder overtime. But it is a good way to set up a saving account. Your interest earnings will bring more during next period and so on. Your balance graphic no longer will be a steady increasing line but an exponential growth.

### Importance of Compound Interest and Rule of 72

Compound interest is definitely one of the most important economic term. It's power most of the times under estimated. Especially when interest rates are higher or the term is too long people tend to look for near future payments and dont extrapolate the results. With this calculator you can check your earnings with different interest rates or how increasing the term affects your total earnings. To calculate compound interest you need to add up the interest earnings for every time period given. Also there is a shortcut to do the math easily. The method called "Rule of 72" gives approximately correct results to see when your money doubles itself. Simply double time can be calculated by dividing 72 by interest rate. For example with %5 interest rate your 10000\$ doubles in 14.4 years. If you use the calculator you will see that it is actually 167 months (13.91 years) Of course with Rule of 72 tax cant be calculated.

### Examples With Compound and Simple Interest

Now lets see the compound in action. With balance of 20000\$ and interest rate of 10% I will calculate both with and without compound interest. for keep comparison clean not adding tax for now. For simple interest you will earn total 4000\$ in 24 months. With monthly compound interest this number rises to approximately 4408\$. Increasing the term to 5 years you will see how difference grows. For simple interest over 5 years make me 10000\$ but with compound interest I will earn 12906\$. Increasing interest rate would make difference far more dramatic: 20% interest rate 5 years compound earning 33919\$, simple interest 20000\$. 🤑 To compare with other numbers you can check simple interest calculator.