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✨ The 8th Wonder

Simple vs Compound Interest

Simple interest and compound interest look similar in year 1, but the gap explodes over time. A $10,000 investment at 5% for 30 years earns $15,000 with simple interest but $33,219 with compound interest compounded monthly. That's more than 2x as much money for the same rate. This free calculator shows you the difference side-by-side, year-by-year.

Use it to understand why starting to save early matters so much, why credit card debt is so dangerous (compound interest against you), and why 'paying yourself first' (compound interest for you) is the foundation of personal finance.

💰 Your Numbers

📌 5 Compounding Rules

Disclaimer: This calculator uses a fixed annual return for illustration. Actual investment returns vary significantly year to year. This is educational — not financial advice.

Related Tools

Once you’ve seen the compounding bonus, these six tools let you apply the same math to your own accounts, time horizons, and savings goals.

Frequently Asked Questions

What's the difference between simple and compound interest?

Simple interest is calculated only on the original principal — you earn the same amount of interest every year. Compound interest is calculated on the principal plus the accumulated interest, so the interest itself earns interest.

Which is better: simple or compound interest?

Compound interest is dramatically better for savers and investors. Over 30+ years, compound interest can be 2-10x larger than simple interest at the same rate. The opposite is true for borrowers — compound interest works against you.

How long does it take for compound interest to matter?

In year 1-3, the difference is small. By year 10, compound interest is roughly 1.5x simple interest. By year 30, it's 2-3x. The longer your time horizon, the more compound interest dominates.

What's the rule of 72?

The Rule of 72 is a quick mental math shortcut: divide 72 by your annual interest rate to get the number of years it takes for your money to double. At 7% interest, your money doubles in ~10 years. At 10%, in ~7 years.

How do I take advantage of compound interest?

Start saving as early as possible (time is the biggest factor), reinvest all returns (don't withdraw interest), and be patient. The magic of compounding is invisible for the first decade — then it explodes.