General
Simple vs Compound Interest Calculator Australia 2026
See how compounding supercharges your returns compared to simple interest.
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How Simple vs Compound Interest Works
- Simple Interest: Interest = Principal × Rate × Time. Interest is calculated only on the original principal.
- Compound Interest: FV = P × (1 + r/n)n×t. Interest is calculated on the principal plus accumulated interest.
- The Difference: Over time, compounding generates significantly more returns because you earn “interest on interest.”
This calculator does not account for taxes, fees, or additional contributions. Results are for illustrative purposes only.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal — the same dollar amount each period. Compound interest is calculated on the principal plus previously earned interest, so your earnings accelerate over time.
How does compound interest work with Australian savings accounts?
Most Australian savings accounts compound daily or monthly. A $10,000 deposit at 5% p.a. compounded monthly earns $512 in the first year — slightly more than the $500 you'd get with simple interest.
What is the Rule of 72?
The Rule of 72 estimates how long it takes to double your money with compound interest. Divide 72 by the interest rate: at 6% p.a., your money doubles in approximately 12 years (72 / 6 = 12).
Does compounding frequency matter?
Yes, but the difference narrows at higher frequencies. Daily compounding earns slightly more than monthly, which earns more than annually. On a $100,000 deposit at 5%, the difference between annual and daily compounding is about $128 per year.
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Last updated: April 2026
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