If you’ve ever wondered how some people quietly grow their wealth while others struggle to save, it often comes down to one principle: compound interest. It’s not about luck or risk—it’s about giving your money time to work harder for you.

Think of your money as a snowball rolling downhill. At first, it’s small, but as it rolls, it gathers more snow, growing bigger and faster. That’s the magic of compounding.

What Is Compound Interest?

Compound interest is interest earned on both your original deposit (the principal) and on the interest you’ve already earned. Over time, this creates a self-reinforcing cycle of growth.

The Compound Interest Formula

Use this formula to estimate growth over time:

A = P (1 + r/n)^{(n × t)}

• A = the final amount
• P = principal (starting balance)
• r = annual interest rate (decimal)
• n = how often interest compounds per year
• t = time in years

Skip the math and plug your numbers into the FundCalc Compound Interest Calculator—it runs the formula instantly and charts your growth.

The Power of Daily Compounding

Most people only think about yearly interest, but compounding can happen more frequently—monthly, weekly, or even daily.

With daily compounding, your money earns interest 365 times a year. That means every day, you’re earning interest on slightly more than the day before.

Use FundCalc’s daily compound interest calculator view to compare daily vs. monthly or yearly compounding. Over long periods, the difference is eye-opening.

Example: Turning $1,000 Into Over $3,000

Imagine you invest $1,000 at a 6% annual rate for 20 years.

• Simple interest (no compounding): $1,000 grows to $2,200.
• Compound interest, compounded monthly: $1,000 grows to about $3,207.

That’s an extra ~$1,007 just from compounding. Try your own numbers in the FundCalc Compounding Calculator—adjust the rate, timeframe, or contributions and watch the curve steepen.

Why Compounding Works So Well

1. Time is your biggest ally. The earlier you start, the more time your money has to grow on itself.
2. Reinvesting creates momentum. Letting earnings compound multiplies your growth rate.
3. Consistency compounds results. Even small, regular contributions add up faster than you expect.

Avoid These Common Mistakes

• Waiting to start. Every year you delay investing is a year you can’t get back.
• Withdrawing earnings. Pulling out interest interrupts the compounding cycle.
• Overlooking debt. Compound interest can also work against you with high-interest loans.

The Takeaway

The compound interest formula may look simple, but its impact is massive. Small amounts invested early can become life-changing sums later.

Try FundCalc’s Compound Interest Calculator to see your own growth potential. Experiment with daily compounding, tweak your contribution schedule, and let the math show how time turns savings into wealth.

Because at the end of the day, the greatest financial advantage isn’t timing the market—it’s time in the market.