Guide · Investing basics
What Is Compound Interest? Simple Explanation With Examples (2025)
Learn how your money can grow faster than you expect — with clear USD examples and a free online calculator.
Why Everyone Talks About Compound Interest
Compound interest allows your money to grow exponentially, not just linearly.
Test the examples with your own numbers.
Open compound interest calculator →What Is Compound Interest?
Compound interest means you earn interest on interest.
The Formula
FV = P × (1 + r / n)(n × t)
Example 1: $10,000 at 6% for 20 Years
| Years | Balance |
|---|---|
| 1 | $10,616 |
| 5 | $13,488 |
| 10 | $18,194 |
| 20 | $32,071 |
Example 2: Adding $100 Monthly
Final amount: ~$52,092
Example 3: Starting Early vs. Late
| Investor | Age | Monthly | At 65 |
|---|---|---|---|
| Alex | 25 | $200 | $520,000+ |
| Ben | 35 | $200 | $250,000+ |
Simple vs Compound Interest
| Type | How it works | Growth |
|---|---|---|
| Simple | Interest only on principal | Linear |
| Compound | Interest on interest | Exponential |
Final Thoughts
Start early, stay consistent, let compounding work for you.