Comparison
| Frequency | Final value | Total interest | vs annual |
|---|
Why compounding frequency matters
Compounding frequency describes how often the interest you earn is added back to your balance so it can start earning interest itself. The more frequently interest is compounded, the more "interest on interest" you collect over the same period.
Annual compounding adds interest once a year; daily compounding adds it 365 times a year. Because each addition slightly raises the balance that earns the next period's interest, higher frequency always produces a larger final value for the same nominal annual rate.
The math
The effective growth factor over one year is (1 + r/n)n, where r is the annual rate and n is the number of compounding periods per year. As n grows, this factor approaches er — the continuous-compounding limit — but it never exceeds it. That is why the jump from annual to daily is meaningful, while adding even more frequency yields rapidly diminishing returns.
How to read the results
Enter a starting amount, an optional monthly contribution, a rate, and a term. The table lists the final value for all five frequencies, with the highest value highlighted, and the chart shows the upward relationship. The "vs annual" column expresses each result as a percentage gain over annual compounding, so you can see at a glance whether the extra frequency is worth pursuing.
Explore more tools
- Compound interest calculator — the main future-value tool.
- Retirement calculator — how much to save each month.
- Inflation calculator — your money's real purchasing power.