Compound interest is interest that earns interest. Money left to compound grows faster and faster over time — it's the single most important idea in saving and investing. Here's how it works, the formula behind it, and a free calculator to run your own numbers.
Try the compound interest calculator →Compound vs simple interest
Simple interest pays only on your original amount. Compound interest pays on the original and on the interest already added, so each period's interest is a little bigger than the last. Over a few years the gap is small; over decades it becomes enormous.
The formula
Future value = P × (1 + r/n)^(n·t), where P is the starting amount, r the annual rate as a decimal, n how many times a year interest compounds, and t the number of years. With regular deposits you add the future value of each contribution on top.
Why compounding frequency matters
The more often interest is added — monthly or daily rather than once a year — the sooner it starts earning its own interest, so the same headline rate returns a little more. The effect is real but usually small next to the rate and the time.
Time is the biggest lever
Because growth compounds, years matter more than almost anything else. Starting earlier — even with smaller amounts — usually beats starting later with more, thanks to the extra compounding periods working in your favour.
Regular deposits supercharge it
Adding a fixed amount every month means every deposit starts compounding from the day it lands. A modest monthly contribution over many years often grows to more than the initial lump sum on its own.
It's a model, not a promise
Real returns vary, and fees, tax and inflation eat into them. Use the calculator to plan and compare scenarios, but treat the result as an estimate, not a guarantee.
Frequently asked questions
What's the difference between compound and simple interest?+
Simple interest is paid only on your original amount; compound interest is paid on the original plus all the interest already added. Compounding pulls further ahead the longer you leave it.
How often should interest compound?+
More frequent compounding earns slightly more at the same rate. Many savings accounts compound monthly or daily; the calculator lets you pick a frequency and compare.
Does a small monthly deposit really matter?+
Yes — every deposit compounds from the day it's added, so regular contributions often grow to more than the starting amount over long periods.
The iznkit editorial team builds and documents free, no-sign-up tools for freelancers, small businesses and developers — and writes these guides to go with them.
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