A simple interest calculator shows how much interest a starting amount earns when interest is paid only on that amount.
How much interest will my money earn?
CompoundingCompounding sets how often interest is added to the balance in the compound line. Simple interest has no compounding, so this choice never changes the simple total.
How often interest is added in the compound comparison line. It does not change the simple interest. Monthly adds it twelve times a year, daily adds it 365 times (we assume 365 days), and yearly adds it once.
$
The starting amount that earns interest. Type a plain number like 1000, with no dollar sign or commas. The most we accept is $10,000,000.
%
The yearly interest rate you want to try, as a plain number like 5. It is an assumption, not a forecast. We accept 0 to 30.
How many whole years the interest is earned. We accept 1 to 80.
Your result
Simple interest earned in 10 years
$500
Up: Compounding would earn $147 more
$1,000 principal plus $500 of simple interest.
$0$500$1K$1.5K
0510
$1.5K$1.6K
Simple interest
Compound interest
What compounding adds
$1,000 at 5% a year for 10 years, year by year: the simple total, the total compounded monthly and the gap between them. The rate is an assumption, and history is not a forecast.
Year
Simple total
Compound total
Gap
0
$1,000
$1,000
$0
1
$1,050
$1,051
$1.16
2
$1,100
$1,105
$4.94
3
$1,150
$1,161
$11
4
$1,200
$1,221
$21
5
$1,250
$1,283
$33
6
$1,300
$1,349
$49
7
$1,350
$1,418
$68
8
$1,400
$1,491
$91
9
$1,450
$1,567
$117
10
$1,500
$1,647
$147
$1,000 at 5% a year for 10 years earns $500 of simple interest, $50 every year, for a total of $1,500.
Compounded monthly, the same money reaches $1,647, which is $147 more, or 29% more interest than simple interest earns.
The rate is an assumption you pick. Real returns rise and fall, and history is not a forecast.
Simple total$1,500
Compound total$1,647
GapThe compound total minus the simple total. It is the interest that was paid on earlier interest. The gap is 0 in year 1 with yearly compounding, and it grows every year after that.$147
How Does a Simple Interest Calculator Work?
A simple interest calculator multiplies the principal by the yearly rate and by the number of years, so interest is never paid on earlier interest. In the formula, I is the interest earned, P the principal, r the yearly rate as a decimal and t the years.
I = P × r × t
Compound interest uses A = P(1 + r/n)^(nt) instead, where A is the final amount and n is how many times a year interest is added, so each round of interest earns interest too.
Choose a principal, a yearly rate and a number of years.
Simple interest for one year is the principal times the rate as a decimal. For the default plan that is $1,000 × 0.05, or $50. Every year adds that same amount.
Multiply by the years to get the interest earned. For the default plan that is $50 × 10, or $500. Add the principal to get the simple total, $1,500.
For the comparison we compound the same principal at the same rate for the same years. Monthly adds interest twelve times a year, daily adds it 365 times (we assume 365 days with no leap years), and yearly adds it once. Nothing is added after the start.
The gap is the compound total minus the simple total. It is 0 when both methods have paid interest only once, and it grows after that.
The table shows the same plan every 5 years, and always the last year.
$1,000 at 5% a year for 10 years, compounded monthly for the comparison and shown every 5 years. The rate is an assumption, and history is not a forecast.
Year
Simple total
Compound total
Gap
0
$1,000
$1,000
$0
5
$1,250
$1,283
$33
10
$1,500
$1,647
$147
The Math Behind Simple and Compound Interest
Why does compound interest pull away from simple interest?
Compound interest pulls away from simple interest because simple interest is paid only on the principal, while compound interest is also paid on interest already earned. Rapunzl's calculator splits the default plan year by year. After 1 year the two totals are $1.16 apart, after 5 years they are $33 apart, and after 10 years they are $147 apart. The straight line adds $50 a year. The curve adds a little more each year, because the balance it earns on keeps growing. The 5% is an assumption, and history is not a forecast.
How much bigger does the gap get with more years?
The gap between simple and compound interest grows faster than the years do. For the default plan, simple interest is $1,500 after 10 years, $2,000 after 20 years and $2,500 after 30 years. Compounded monthly, Rapunzl's calculator puts the gap at $147, $713 and $1,968 for those same years. Going from 10 to 20 years multiplies the simple interest by 2 but the gap by about 5. The rate is an assumption, and history is not a forecast.
Does the compounding choice change the comparison?
The compounding choice changes only the compound line and never the simple one. For the default plan, Rapunzl's calculator ends at $1,629 with yearly compounding, $1,647 with monthly and $1,649 with daily, while simple interest stays at $1,500 in all three. With yearly compounding and a single year, both methods give $1,050 and the gap is $0, because interest has been paid only once. A bank's own rules decide which compounding applies to a real account, and the 5% here is an assumption, not a forecast.
Using the Calculator in Class
Project it and ask students to work out the simple interest for the default plan by hand with I = Prt before you press go, then check it against $500. Next, change only the years, from 10 to 20, and ask whether the gap doubles. It goes from $147 to $713, which is a good moment to ask why. Close with a rate of 0%, where the gap is $0, and ask what that says about where the gap comes from. The modules below cover exponents and saving versus investing, and the posts have worksheets for the same idea.
At an assumed 5% a year, $1,000 earns $500 in simple interest over 10 years: $1,000 × 0.05 × 10. That is $50 a year, for a total of $1,500. Compounded monthly, the same money reaches $1,647, which is $147 more. The rate is an assumption, and history is not a forecast.
The simple interest formula is I = P × r × t, written I = Prt, where I is the interest earned, P the principal, r the yearly rate as a decimal and t the years. For example, $500 at 6% for 3 years is $500 × 0.06 × 3, or $90, and the total is $590. The rate here is an assumption, and history is not a forecast.
Simple interest is paid only on the starting amount, while compound interest is also paid on the interest already earned. For $1,000 at 5% a year for 10 years, simple interest adds $50 every year. Compounded yearly, year 1 also adds $50, but year 2 adds $52.50 because the balance is now bigger. Over all 10 years, simple interest earns $500 and the monthly compound line earns $647. The 5% is an assumption, not a forecast.
They match when no interest has been paid on earlier interest yet. With yearly compounding and one year, $1,000 at 5% gives $1,050 either way, so the gap is $0. They also match at a rate of 0%, where both totals stay at $1,000, and when nothing is put in. After year 1 the compound line pulls ahead. The rates here are assumptions, and history is not a forecast.
No. The totals are arithmetic on the numbers you enter, not a prediction. They assume the same rate every year, and they leave out taxes, account fees and inflation. Prices rise over time, so $1,500 after 10 years buys less than $1,500 does today. Real accounts and investments rise and fall, and history is not a forecast.
Want this in your school?
Rapunzl is a personal finance course with a real-time investing simulator, built for classrooms. Request a free demo, or pass this page to a teacher who would want it.
Your child gets $10,000 in practice money to invest at real market prices, plus lessons on budgeting, credit and paying for college. They can work through all of it at home.
Simple interest is paid on the starting amount only, the same amount every year. The comparison line compounds that same amount at the same rate, and daily compounding uses 365 days a year with no leap years. The rate is an assumption, results are before taxes, fees and inflation, and history is not a forecast.
