Compound Interest Calculator
See how a lump sum grows over time when interest compounds.
- Interest earned
- $8,194
This calculator provides estimates only. It is general information, not financial or taxation advice, and doesn't account for your full personal circumstances. Confirm figures with your lender or a licensed adviser before making a decision.
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How this calculator works
Compound interest is interest calculated not just on your original amount, but on the interest you've already earned — so your balance grows faster over time than it would with simple interest, where you only ever earn interest on the original sum. The more frequently interest compounds (daily versus annually, for instance), and the longer your money is invested, the bigger the gap becomes.
Enter your starting amount, the annual interest rate, how long you're investing for, and how often interest compounds. The formula used is FV = P(1 + r/n)^(nt), where P is your principal, r the annual rate, n the compounds per year, and t the number of years.
Worked example: $10,000 at 6% p.a., compounding monthly, grows to $18,193.97 after 10 years — $8,193.97 in interest, more than 80% of the original amount, entirely from compounding.
This calculator shows a lump sum growing with no further contributions. If you're adding regular deposits on top — like a savings plan — use the future value calculator instead, which handles both a starting amount and ongoing contributions together.
Frequently asked questions
- Why does compounding frequency matter?
- More frequent compounding (daily vs annually) means interest starts earning its own interest sooner, so the same annual rate produces a slightly higher return the more often it compounds — though the difference shrinks as rates get lower.
- How is this different from simple interest?
- Simple interest is calculated only on your original principal every period, so it grows linearly. Compound interest is calculated on the growing balance (principal plus prior interest), so it grows faster the longer it runs — see our simple interest calculator to compare directly.
- Does this account for tax on interest earned?
- No — interest earned on savings and investments is generally taxable income in Australia. This shows the gross (pre-tax) growth; your actual after-tax return will be lower depending on your marginal tax rate.