Last updated 23 August 2026
The formula
A = P(1 + r/n)^(nt) — the starting principal P, growing at annual rate r, compounded n times a year, over t years. Interest earns its own interest at every compounding point, which is what makes growth accelerate over time rather than staying flat.
How much frequency actually matters
Going from annual to monthly compounding makes a real difference over a decade or more. Going from monthly to daily makes very little difference at typical rates — the gain from more frequent compounding shrinks quickly once you're past a handful of times per year.
Common questions
Why does compounding frequency matter?
More frequent compounding means interest starts earning its own interest sooner. The difference between annual and monthly compounding is real but modest at typical rates — daily versus monthly barely matters, while annual versus monthly is worth noticing over many years.
What's the formula being used?
A = P(1 + r/n)^(nt) — principal, growing at rate r, compounded n times per year, for t years. It's the standard compound interest formula used for savings accounts, fixed deposits and similar products.
Does this account for taxes on the interest?
No — this shows gross growth before any tax on interest income, which varies by country and account type. Check your local rules for what you'd actually keep.