Interest Calculator Guide

What this guide covers

This guide walks you through how to use the interest calculator to answer questions like:

• How much interest will I earn on my savings over time?
• What's the difference between simple and compound interest?
• How does compounding frequency change my final balance?
• How much of my ending balance is money I put in vs. interest earned?

It's useful for savings goals, debt comparisons, and basic investing scenarios where you want to see how interest actually adds up.

Simple vs. compound interest (quick overview)

The calculator lets you switch between simple interest and compound interest so you can see how each one works.

Simple interest

Simple interest only applies to your original principal. Interest doesn't earn more interest.

A common simple interest formula looks like this:

Amount = Principal × (1 + r × t)

• Principal = starting amount
• r = annual interest rate (as a decimal, e.g. 0.05 for 5%)
• t = time in years

Compound interest

Compound interest means you earn interest on your principal and on the interest that's already been added.

A simplified compound interest formula looks like:

Future Value = Principal × (1 + r / n)n × t

• r = annual interest rate
• n = number of compounding periods per year
• t = time in years

The calculator uses these ideas behind the scenes so you can focus on the results instead of the math.

Inputs you'll enter

• Principal (starting amount) – how much you're beginning with.
• Interest rate – the annual rate you expect to earn or be charged (for example, 5% or 12%).
• Time period – how long you'll save or owe the money (usually in years).
• Interest type – choose Simple or Compound to compare both.
• Compounding frequency (for compound interest) – yearly, quarterly, monthly, etc., if your calculator supports it.
• Additional contributions (optional) – extra money you plan to add over time, if available in your version of the calculator.

Small changes in time, rate, or compounding can make a big difference in the final result—especially with compound interest.

What the interest calculator shows you

• Final amount / future value – how much you'll have at the end of the period.
• Total interest – how much the money earned (or how much you paid in interest).
• Total contributions – how much of the final amount came from your own deposits (if contributions are used).
• Simple vs compound comparison – how the final amount changes when you switch interest types or compounding frequency.

This makes it easy to see how powerful compounding is compared to a simple interest setup.

Example: Simple vs compound interest on the same money

Let's say you have $5,000 and want to see what happens over 5 years at 5% interest:

Simple interest example

• Principal: $5,000
• Rate: 5% simple interest
• Time: 5 years

Interest = $5,000 × 0.05 × 5 = $1,250
Final amount = $5,000 + $1,250 = $6,250

Compound interest example

• Principal: $5,000
• Rate: 5% compounded annually
• Time: 5 years

Using the compound interest formula, your final amount is closer to $6,381.

That's a small difference over 5 years, but over 10, 20, or 30 years, compound interest can create a much bigger gap. Use the calculator to test longer time frames and different compounding schedules.

Tips for using the interest calculator wisely

• Use simple interest when interest only applies to the original balance (some loans or short-term deals).
• Use compound interest for most savings, investing, and long-term growth scenarios.
• Compare different rates to see how much more you earn at 4%, 6%, or 8% over the same time period.
• Play with time – extending your time horizon often has a bigger impact on compound interest than increasing your contributions a little.

When to use this interest calculator

• Comparing savings account or CD options.
• Seeing how fast a debt grows if left unpaid.
• Estimating future value of a one-time deposit or ongoing savings plan.
• Teaching yourself or others the real difference between simple and compound interest.

Any time you want to see how interest changes your balance over time, this calculator gives you a quick, visual way to test scenarios.