Compound Interest Calculator

Compound interest is interest earned not just on your original principal (the money you deposited), but also on the interest you have already earned. This creates exponential rather than linear growth over time. For example, if you invest $10,000 at 5% interest compounded annually: after year 1 you have $10,500; after year 2, $11,025; after year 10, $16,289 — growing by $6,289 in total compared to $5,000 from simple interest. The longer your money compounds, the more dramatic the effect: the same $10,000 at 5% becomes $43,219 after 30 years. This principle is central to KiwiSaver growth and long-term savings in NZ. Even small regular contributions to a savings account or KiwiSaver fund compound significantly over decades. Albert Einstein reportedly called compound interest "the eighth wonder of the world." Understanding it is fundamental to financial planning. Source: Commission for Financial Capability — Sorted NZ (sorted.org.nz).

The more frequently interest is compounded, the faster your savings grow — though the differences become smaller at higher frequencies. With an annual rate of 5%: compounded annually gives $10,500 after one year on a $10,000 deposit; compounded monthly gives $10,511.62; and compounded daily gives $10,512.67. Over 10 years, daily compounding produces about $115 more than annual compounding on $10,000 — a modest difference for a single deposit. However, for a KiwiSaver or investment account receiving regular contributions, the cumulative difference over 20-30 years can be substantial. In NZ, most savings accounts and term deposits compound daily or monthly. KiwiSaver returns are not paid as compound interest per se — instead the unit prices of funds rise (or fall) as investment returns accrue, which has a similar compounding effect. When comparing NZ savings products, always check the compounding frequency alongside the advertised interest rate. Source: interest.co.nz for live NZ savings rates.

The Rule of 72 is a simple mental maths shortcut to estimate how many years it takes to double your money at a given compound interest rate. You simply divide 72 by the annual interest rate. At 6% annual return, your money doubles in approximately 72 / 6 = 12 years. At 4%, it takes 18 years. At 9%, just 8 years. The Rule of 72 works as an approximation for compound interest and is accurate within about 1% for rates between 3% and 12%. For NZ savers, applying the Rule of 72 helps illustrate the power of higher-return investments like diversified KiwiSaver growth funds (historically 7-9% per year) versus low-rate savings accounts (2-4%). It also highlights the damaging effect of high-interest debt: a credit card debt at 20% interest effectively doubles every 3.6 years if left unpaid. The rule is a useful tool for quick financial planning comparisons. Source: Commission for Financial Capability (Sorted NZ, sorted.org.nz).

In 2026-27, typical NZ savings account interest rates range from around 2% to 4.5% per annum, while 1-year term deposit rates are generally in the 4% to 5% range, depending on the bank and the amount deposited. Rates have declined from the highs of 2023-24 as the RBNZ has cut the OCR. Online savings accounts and notice savings accounts tend to offer better rates than standard at-call accounts. Term deposits offer higher certainty in exchange for locking up your funds for a fixed period (typically 30 days to 5 years). The major NZ banks (ASB, ANZ, BNZ, Westpac, Kiwibank) compete on term deposit rates, and comparison sites like interest.co.nz provide current rates updated daily. For amounts over $100,000, banks may offer negotiated rates. NZ bank deposits up to $100,000 per depositor per bank are covered by the deposit insurance scheme (Depositor Compensation Scheme) from 2025. Source: interest.co.nz; RBNZ (rbnz.govt.nz).