About This Comparison
Simple interest pays a fixed amount each period, calculated only on the original principal — it's the same dollar figure every single year, so plotted over time it's a straight line. Compound interest calculates each period's interest on the principal plus everything already earned, so the amount it pays grows every period — plotted over time it curves upward, slowly at first and then dramatically. This tool charts both side by side for your own numbers, so you can see exactly how much that curve is worth to you, along with a year-by-year table showing the widening gap. Everything is calculated locally in your browser.
The Formulas
Simple interestTotal = Principal × (1 + rate × years) — the interest earned each year is always the same dollar amount, since it's only ever calculated on the original principal.
Compound interestTotal = Principal × (1 + rate/n)^(n × years) — where n is how many times per year interest compounds. Each period's interest is calculated on the running total, not just the original amount.
Why year one is identicalWith no prior interest yet to compound, the first period pays the same amount either way — the two methods are mathematically indistinguishable until the second compounding period.
Compounding frequencyMore frequent compounding (monthly vs annually) grows the compound total slightly faster at the same stated rate, since interest starts earning on itself sooner — it has no effect on simple interest, which never compounds regardless of how often it's calculated.
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