Understanding the compound interest calculator
Compound interest pays interest on interest: each period's earnings join the principal and start earning themselves. The result is exponential rather than linear growth, which is why time matters more than rate for long horizons money at 7% doubles roughly every ten years (the "rule of 72"), so a 40-year horizon means four doublings, a factor of sixteen.
Compounding frequency matters less than people expect. Moving from annual to monthly compounding at 5% lifts the effective yield only from 5.000% to 5.116%, and daily adds just a hair more. When comparing accounts, compare the APY (effective annual yield), which already folds the frequency in.
Results are estimates for education only and are not financial advice.