IncomeGrid

Compound interest calculator

Compound interest is interest earned on interest. Over long periods it does most of the work. Use the calculator, then see how small rate differences add up. IncomeGrid helps you discover higher-yield income opportunities you may not have looked at, so you can earn more on the same money. It has 40,000+ investment options screened, each with its yield, after-tax yield and a risk level from 1 to 5.

Calculator







The formula

Without additions: final = start × (1 + r/n)^(n × years), where r is the yearly rate and n the number of compounding periods per year. More frequent compounding adds a little; a higher rate adds far more.

Compounding frequency vs rate

Going from yearly to daily compounding at the same rate makes a small difference. Moving to a higher rate makes a large one. That is why comparing after-tax yields matters more than the compounding schedule. IncomeGrid ranks every item by yield after tax for where you live: after federal, state and each investment type tax (Treasuries, municipal bonds, corporate bonds, funds, REITs and filed offerings are each taxed differently).

APR vs APY

APR is the stated yearly rate; APY includes compounding. Banks quote APY on deposits so they can be compared (FDIC). When comparing a deposit with a bond or Treasury yield, use APY.

The rule of 72

Divide 72 by the yearly rate to estimate years to double: about 9 years at 8%, 12 at 6%, 18 at 4%. It's a rough guide that works best for rates between about 4% and 12%.

Compound interest in practice

Deposits compound by crediting interest to the account. Treasury bills and many bonds don't compound by themselves – they pay interest or mature – so compounding happens only if you reinvest. Funds can reinvest distributions automatically. In each case, the rate you reinvest at matters most. Monthly additions often matter more than the rate in the early years; the rate dominates later.

Compounding and inflation

Compound growth also works against you through inflation: prices compound too. To see real growth, subtract inflation from the rate you enter. If the after-tax rate is below inflation, the balance grows but buys less.

How IncomeGrid helps you earn more

IncomeGrid helps you discover higher-yield income opportunities you may not have looked at, so you can earn more on the same money. It has 40,000+ investment options screened, each with its yield, after-tax yield and a risk level from 1 to 5. Choose where you live and every yield is shown after federal, state and each investment type tax, so you can see which options pay you more.

Find a higher rate to compound →   or browse example income portfolios

Frequently asked questions

How is compound interest calculated?

Each period, interest is added to the balance, and the next period's interest is earned on the larger balance.

Is daily compounding much better than monthly?

Only slightly. The rate itself matters far more.

Does tax affect compound interest?

Yes. In a taxable account, tax on each year's interest lowers the rate that compounds. Enter your tax rate above.

Not investment advice. General information only; yields change, check the source before acting.

Related guides

Sources

More guides