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/ Simple vs Compound Interest Comparison
Simple vs Compound Interest Comparison
Evaluate and compare simple interest vs compound growth returns side-by-side.
Why compound interest yields higher long-term returns
Simple interest is calculated solely on the initial principal amount. Compound interest, on the other hand, is calculated on the principal plus the accumulated interest of previous periods. Often referred to as "interest on interest", compounding accelerates savings growth over time.
This calculator displays a side-by-side comparison of both methods year-by-year, illustrating the compound interest bonus for different frequencies.
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Simple interest is computed strictly using the formula A = P(1 + rt). The interest earned remains constant every year.
The more frequently interest is compounded (e.g. monthly vs annually), the faster the balance increases, as interest starts earning its own interest sooner.